Household debt at all-time high in Canada, study finds

[mecassa]

http://www.ctv.ca/servlet/ArticleNews/story/CTVNews/20090526/household_debt_090526/20090526?hub=TopStories

A snapshot of the article:

*Fifty-eight per cent of respondents said living expenses were the main reason for the increasing debt -- up from 52 per cent in 2007.

*Credit cards and lines of credit accounted for the largest proportion of consumer debt.
*In total, 85 per cent of Canadians said they had outstanding debt on their credit card.

*One quarter of Canadians said they would not be able to handle an unexpected expenditure of $5,000. One in 10 would struggle to cover an unexpected expense of $500.

*Forty-two per cent of Canadians acknowledged their debt is on the rise.

Any thoughts?

[speedyforme]

I assume about 1% of this info applies to RFD'ers here.

"In total, 85 per cent of Canadians said they had outstanding debt on their credit card."

This part was shocking to me. No wonder banks/stores are rich.

[asmielia]

What does "oustanding debt on their credit card" mean? I don't carry a balance, but technically I have credit card debt that I pay off in full each month.

[P1x44r]

What does "oustanding debt on their credit card" mean? I don't carry a balance, but technically I have credit card debt that I pay off in full each month.

I would think "outstanding debt" means debt accumulating interest.

[dealguy1]

I would think "outstanding debt" means debt accumulating interest.

For a bank or credit card company, outstandings would include all balances, whether or not they are interest accruing. However, since this number is based on a survey, it would depend entirely on how the question was worded, and how the respondents interpreted it.

This part scares me:

"In the past, people would look at the total cost of the home and determine if that was a number they could live with," he said.

"Today, people make that purchasing decision based on the monthly costs, which tends to be a reflection of what we're earning today in good times."

This might work now, but what happens when interest rates go up - which has to happen eventually? After all, they can't go down any further...

[AllWheelDrift]

this part scares me:

"in the past, people would look at the total cost of the home and determine if that was a number they could live with," he said.

"today, people make that purchasing decision based on the monthly costs, which tends to be a reflection of what we're earning today in good times."

this might work now, but what happens when interest rates go up - which has to happen eventually? After all, they can't go down any further...
+1

[brockster]

For a bank or credit card company, outstandings would include all balances, whether or not they are interest accruing. However, since this number is based on a survey, it would depend entirely on how the question was worded, and how the respondents interpreted it.

This part scares me:

"In the past, people would look at the total cost of the home and determine if that was a number they could live with," he said.

"Today, people make that purchasing decision based on the monthly costs, which tends to be a reflection of what we're earning today in good times."

This might work now, but what happens when interest rates go up - which has to happen eventually? After all, they can't go down any further...

Interest rates will go up... people on variable who cannot afford the increase will be screwed. That is why I am on variable prime minus but making payments at 5%.... so I can knock lots of the mortgage in periods of low interest but also not notice when interest rates go up. You just gotta get accustomed to not paying the minimum.

I am always amazed when I talk to people who just bought a house or are looking who have no idea how a mortgage works, how interest rates affect them etc. They just see that house prices are down, interest rates are lower and think, time to buy!.... the time to buy is not just cause rates are low and prices are down (a bit).... if you can't afford the house in a period of inflation, you shouldn't be buying now.

[mecassa]

This article in combination with yesterdays news about the lack/inadequacy of private pensions plans in Canada is definitely worrying.

[speedyforme]

I know someone who bought a home that knew nothing about the difference between a variable and fixed rate! :-0

[AllWheelDrift]

Interest rates will go up... people on variable who cannot afford the increase will be screwed.
It's not just the variable rate people that will be affected. People that have to renew their 5 year fixed rates will be just as screwed.

[brockster]

It's not just the variable rate people that will be affected. People that have to renew their 5 year fixed rates will be just as screwed.

True.... 5 years from now (and less) I would expect higher inflation and higher interest rates.

We are as about as low as we can go for interest rates so some people think that is the only reason to buy yet forget a house is often a 20 year + endeavor.

[15-20_God]

It's not just the variable rate people that will be affected. People that have to renew their 5 year fixed rates will be just as screwed.

it'll just set up the second downleg in the housing market when in 5 years ppl will be renewing their mortgage and look at 6% - 7% rates (guesstimate) instead of the 3% they were use to. Imagine the surprise that after 5 years of paying off mortgage principal, their monthly payment will actually be higher after they renew.

[pitz]

Well geez, I wonder why? This couldn't have had anything to do with the economic decline that Canada's been experiencing since 2000, with the exception of oil and gas activity, could it? Geez.. This isn't rocket science people, the average Canadian is *broke*, and getting poorer.

Meanwhile, we have bozos who come to RFD each and every day who claim that we can survive and subsist on merely being a banking society, a bunch of rent-collectors, instead of being actual wealth creators. We have people coming here on a daily basis claiming that engineering and science is 'unimportant', and that University grads shouldn't earn more than $60k/year to start. What a trainwreck of thought, I must say :twisted:

[adamtheman]

Record high levels of debt, combined with a lowering GDP, indicate that we are in serious trouble. We don't need fancy reports from financial analysists, or nobel prize winning accountants, we just need to open our eyes. Right now is the calm before the storm, but if you look up at the sky, you can see the storm brewing. Unfortunately none of us in our generation have ever faced anything like this, so until it happens we will be unable to grasp it.

[brockster]

Record high levels of debt, combined with a lowering GDP, indicate that we are in serious trouble. We don't need fancy reports from financial analysists, or nobel prize winning accountants, we just need to open our eyes. Right now is the calm before the storm, but if you look up at the sky, you can see the storm brewing. Unfortunately none of us in our generation have ever faced anything like this, so until it happens we will be unable to grasp it.

You can't predict the future but you can prepare for bad situations. Personally I am trying to pay the mortgage down and not get into any debt like buying more stocks etc... I think cash is king and will continue to be that way in a financial crisis. People with lots of debt often do not understand the art of saving and just live in the moment. Not everyone, but a lot of people are instant gratification, the "ME" generation...

[speedyforme]

All I have is money in the bank and my mortgage. And nothing else, no stocks, no bonds, only a bit in RRSPs, that's it.

[Psycho44]

I'm the same situation money in bank, mortgage and small credit card debt. No stocks or RRSP. 5 years from now I'll be making more money than I'm currently making now and hopefully have paid of more principal so an increase in interest rates and maybe an increase in monthly rate won't hurt me as much.

[KawaiiTentacleBeast]

I got $15k on the MBNA 1.99% for life deal. :lol:

[duner]

When I applied for my variable mortgage at prime, the rate was 6%. When I signed the final papers, the rate was 5.25%. They asked if I wanted to recalculate the payment to a lower value. I declined and I've been paying the equivalent of a 6% mortgage for the last year. It feels good to know that more of my money is going to the principle than interest. Also, I won't have any problems paying my mortgage if prime goes up, since the payments are already set for a 6% rate and won't increase unless prime goes above that.