We’ve hit another record high for debt-to-income percentage in Canada. It has climbed in the third quarter of 2013 to 163.7 per cent, up from 163.1 per cent in the previous three-month period according to Statistics Canada last week.
The rise in debt ratio could be disastrous for some families when interest rates eventually rise. The Bank of Canada have been warning Canadians about the impending rise in interest rates for some time now, however we may live with the reprieve a little while longer. For more on Interest Rate Increase, see “Interest Rate Increase will hurt Canadians with non-mortgage debt”.
Here are some of the points of interest from the federal agency’s report:
- Household net worth rose by 2.2 per cent to $211,000, led by a 3.7-per-cent rise in the stock market.
- Real estate values rose by 1.5 per cent.
- Consumer credit debt rose by 1 per cent to $505-billion.
- The consumer credit debt to disposable income ratio climbed to 163.7 per cent from 163.1 per cent.
- Mortgage debts rose by 1.8 per cent to $1.1-trillion, compared with the average quarterly growth of 1.7 per cent over the past five years.
- National net worth climbed 2.1 per cent to $7.5-trillion, or, on a per-capita basis, $212,700. That’s a slower pace than the second quarter’s 3.2-per-cent rise.
The average household net worth and real estate values have climbed along with consumer debt ratio. All together, it appears the average household is doing better financially exponentially. Since the new mortgage rules mandated by the government in the summer of 2012 were put into place, fewer Canadians took on mortgage debt. Decreasing the maximum refinance maximum and maximum amortization period has helped Canadians, at least a little, from overextending their finances.
That being said, we are still alarmed at how many Canadians over extend their finances and have no choice but to come to professionals like us for help in resolving their debt burden. The increased debt-to-income ratio clearly shows consumers are more than willing to use credit and worry about paying for it later. Retailers are still making it easier for consumers to do so with purchase payment plans tagged with steep interest.
For tips on how to avoid overspending, read “5 tips to keep you in the Black”.
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