Canadians Beat Another Record for Household Debt Levels
Canadians have broken another record. But this is not one to boast about. Even amid all the warnings and lectures from the Finance Minister and the Bank of Canada, we continue to pile on our debt. Now, our debt levels stand at 164.4 per cent for the third quarter – a drastic increase from the 160.9 per cent that they sat at last year during the same period.
Of course, no one can look at our debt levels and not compare them with what seen in the States just before their collapse. It’s no wonder why. The crisis in the States shook many Canadians and we have said repeatedly that we need to do whatever we can to ensure the same fate does not befall our country. Unfortunately, while we may be adamant about that, we’re actually doing very little about it.
Debt levels in the States just prior to their economy closed in on them, were nearing the 170 per cent mark – not far from where we are now. And debt levels in the States right now are actually far below where we sit. Compared to our 164.6 per cent, levels in American right now are only 144 per cent, according to Desjardins.
Of course, that doesn’t mean that we’ll see the same thing here that they did south of the border. Household debt levels are after all, only one measure of our economic well-being, and our other standards such as our banking systems and the amount of sub-prime mortgages currently on the market, are much lower than they were in the United States at the height of their crisis.
And the Bank of Montreal has also noted that even though our household debt continues to rise, so too does our household net worth. The bank says that those levels are almost back up to where they were in 2007 in Canada – and that year was a record year for us.
But none of that is to say that we shouldn’t be concerned about our debt levels. Benoit Durocher, a senior economist at Montreal’s Desjardins Securities, says that these new stats “should fuel the Bank of Canada’s concerns. Under these conditions, monetary authorities will surely continue to repeat their warning about eventual interest rate hikes for some time.”
Most likely until the time they actually raise those rates, which isn’t predicted to happen until late next year at the earliest. Still, should those households that are severely in debt lose one of their incomes, or face an emergency, that debt could be a very hard obstacle to overcome – and to eventually pay off.
Canadians do need to start getting serious about their debt but with Christmas just days away, that’s likely not going to happen within the next few weeks. Hopefully, we’ve all put our finances as one of our biggest resolutions in 2013!