Despite the current economic climate, Canadians are continuing to accumulate high levels of debt, mainly through mortgages and consumer credit.
One of the most significant sources of household debt is home mortgages. Mortgage debt in Canada has been steadily rising since the mid-1990s, due to an increase in housing prices combined with a rise in consumer borrowing. According to a recent report from the Bank of Canada, mortgage debt accounted for almost 50% of all consumer debt in 2009, and is expected to continue to rise in the coming years.
Consumer credit is another major source of Canadian household debt. Credit cards, lines of credit, and other forms of consumer credit are commonly used by Canadians to finance large purchases or pay for short-term expenses. While the amount of consumer credit outstanding has been gradually increasing over the past decade, recent reports indicate that Canadians have begun to rein in their credit card spending, due in part to higher interest rates and stricter lending rules.
The combined effect of increasing mortgage debt and consumer credit has resulted in an overall increase in Canadian household debt. The average household debt load now stands at almost $90,000 in Canada, compared to just over $20,000 in 1990. This level of debt, combined with lower incomes and rising unemployment, has created a difficult financial situation for many Canadians.
The reality of increasing debt levels and tightening budgets is clearly a cause for concern among policy makers and consumers alike. To help address the situation, the government has taken a number of steps to limit the growth of debt, including introducing legislation to regulate consumer credit and encouraging financial institutions to provide consumer education. Additionally, the Bank of Canada has increased its oversight of financial institutions’ lending practices.
In conclusion, Canadians must take responsibility for their own financial management. The current economic downturn has made it more important than ever to be aware of the dangers of excessive debt, and to take steps to manage one’s personal finances responsibly. By understanding the sources of household debt, as well as the various governmental initiatives put in place to assist with the issue, Canadians can better protect their financial future and ensure a secure retirement.
The article outlines the current reality of debt in Canada, highlighting that although the economic climate has become increasingly challenging, Canadians are still accumulating high levels of debt. Home mortgages and consumer credit are the primary sources of this debt, with the average household now owing almost $90,000 in total. The problem is further compounded by decreasing incomes and rising unemployment. As such, it is essential that Canadians understand the sources of their debt and take steps to manage their finances responsibly. To aid in this process, the Government has implemented legislation to regulate consumer credit and provided financial institutions with additional oversight. Ultimately, being informed about debt and making informed decisions is the best way to protect one’s financial future.
This article was contributed on Nov 04, 2023
