Household Debt at a Record-High, With Carrying Costs Set to Rise

  6/30/2021 |   SHARE
Posted in Financial Health by Stephen Gale | Back to Main Blog Page

Home Buying Financing Concept

One of the greatest bull markets in Canadian real estate history has resulted in Canadians amassing record mortgage debt.

As of April, homeowners owed nearly $2 trillion on mortgages and home equity lines of credit, according to Statistics Canada. That’s a gigantic $18-billion jump from March, marking the fastest monthly increase on record.

Housing mania has driven up another measure of Canadians’ financial wellbeing as well, the ratio of household debt to disposable income. And it’s expected to keep rising for at least the next two years, according to forecasts from Deloitte Canada.

“Particularly in Canada, the housing boom and rising household borrowing remain a key concern,” reads the report.

While that collective debt load is affordable right now—thanks to near-record-low interest rates—borrowers should expect rising rates to take a bite, starting as early as next year. The catalyst will be Canada’s economic recovery, as GDP should return to pre-pandemic levels by the first half of next year, says the OECD.

The risk for borrowers is that the Bank of Canada will have to raise interest rates to tame inflation, perhaps quicker than expected.

As noted previously, markets are betting the BoC will hike its overnight from its current record-low of 0.25% to roughly 2.00%+ over the next five years.


Canadian Households, Household Budget, Household Debt, Personal Finance

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