Canadians Tops In Household Debt

[bush_cheney2004]

Looks like the Greeks and Americans have stiff competiton.....

OTTAWA -- Canada ranks first in terms of debt-to-financial assets ratio among 20 OECD countries, but many Canadians seem unworried by their debt levels, a report by the Certified General Accountants Association of Canada released Tuesday.

The report, titled Where Is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge, showed

Canada ranks first in terms of debt-to-financial assets ratio among 20 OECD countries -- ahead of the Slovak Republic and, tellingly, Greece. The U.S. came in a close fourth.

"When household indebtedness is measured as a ratio of consumer debt to financial assets, it becomes clear that Canadian households rely much more heavily on consumer credit than their counterparts in other countries," the report explained. Canadians' debt-to-income ratio reached 144% by the end of 2009.

Household debt in Canada reached a new high of $1.41-trillion in December 2009. If household debt was spread among all Canadians, each person would hold more than $41,740 in outstanding debt - an amount 2.5 times greater than 1989, according to the study.

http://www.thestar.com/news/canada/article/699762

[msj]

http://www.thestar.com/news/canada/article/699762

I think your title goes better with this link:

CGA Research Report

[Shwa]

I love the way they paint statistics. If they spread the debt out, everyone would owe $41k. But if they so that, do they not also have to spread the assets out too? I am sure some folks in those tenements in Toronto would love a slice of those new 3800 sq ft homes in Markham!

[Moonbox]

I love the way they paint statistics. If they spread the debt out, everyone would owe $41k. But if they so that, do they not also have to spread the assets out too? I am sure some folks in those tenements in Toronto would love a slice of those new 3800 sq ft homes in Markham!

That's true, but those 3800 sq ft aren't what's pushing the debt/asset ratios to 1.4:1.

Those houses, at worst, still have 5% of equity in them, so there's a buttload of Canadians out there who are holding fully unsecured credit out there. It's the middle class holding this debt I'm imagining.

Canadians have terrrible spending habits and it's going to catch up to us eventually. We don't save and we'll fall behind eventually. I'm guilty of it myself. Hopefully I wake up sooner rather thatn later

Edited May 17, 2010 by Moonbox

[Topaz]

I guess if everyone made the salaries of our dear MP's we would have a small house debt. There are Canadians out there that have no jobs, are on EI and soon will be off, then its welfare. The government keep reducing corporate taxes and companies are still leaving the country to Third World countries and a lot more to Mexico, soon to be the capital of the manufacturing! So household debt doesn't surprise most Canadians and I don't think the Tories really care.

[August1991]

b_c, your link doesn't seem to work. Here is the Toronto Star link.

msj is right however to link to the originating CGA research report.

Keep in mind that "household debt" includes both mortgages and consumer debt. As the CGA report makes plain, about 70% of consumer debt is in mortgages and about 30% in consumer debt (probably cars). These numbers have not changed dramatically over the past few years.

-----

Unlike msj, I happen to see debt as a good thing for society.

Unless we have discovered a way to borrow from Martians, for everyone on Earth in debt, there is necessarily someone else on Earth who is saving. IOW, to say that someone is in debt is to say that someone else is saving. Debt (saving) is a measure of confidence between indiviudals. It is a measure of the sophistication of financial markets, and of social trust.

Canada (America in general) is a civilized society in part because young poor people can borrow anonymously from older rich people and buy a house to live decently while they raise their family. Elsewhere in the world, such anonymous borrowing is impossible or difficult and so young people are forced to rely on older family members - often with strings attached.

To give a small practical example, nowadays in Canada, a young gay couple can borrow money from a bank, from anonymous savers, based on their combined income. The couple can purchase a place to live, and in effect save for their retirement by acquiring a real asset of substantial value. Elsewhere in the world, such an anonymous bank loan is impossible and moreover, the families would more likely banish their gay offspring.

----

Debt is one of those curious variables that we should measure differently for society and for individuals, or where the advice for individuals and society is different. If you have debt, pay it off. But if you hear that society has debt, don't worry.

Style is another such variable. Most young women want to wear what is in style, but not so much that everyone is wearing it.

Edited May 18, 2010 by August1991

[msj]

Unlike msj, I happen to see debt as a good thing for society.

Where did I say this?

Would you kindly fcuk off putting words to me since you can't get them right in the first place.

I have maintained all along that debt is fine under the right circumstances.

Getting in over one's head ain't the right circumstances.

Borrowing money during a bubble and not selling out (i.e. finding a greater fool) before the bubble bursts ain't the right circumstances

Borrowing money to build empty homes only to see them stay empty for years ain't the right circumstances.

Borrowing money to buy high only to hold on for years and then, desperately, sell low, ain't the right circumstances.

Etc.

And, while buying a house is nice and all, you conveniently neglect the importance of the mobility of labour to an economy.

Being underwater on a mortgage leads to less mobility and this exacerbates the mismatch of labour and jobs.

You also neglect the economic harm that has been created by the RE bubble.

After all, buying a house isn't really the most productive use of resources (especially at bubble prices) as compared to building something like a factory (assuming the products are in demand etc...).

Edited May 18, 2010 by msj

[August1991]

Would you kindly fcuk off putting words to me since you can't get them right in the first place.

Wow, msj. In Californian, you have issues.

I may be wrong, but do I deserve such vitriol?

I have maintained all along that debt is fine under the right circumstances.

Getting in over one's head ain't the right circumstances.

Define the "right circumstances"?

According to this report, have Canadians gone beyond this limit?

[Shwa]

Keep in mind that "household debt" includes both mortgages and consumer debt. As the CGA report makes plain, about 70% of consumer debt is in mortgages and about 30% in consumer debt (probably cars). These numbers have not changed dramatically over the past few years.

This is interesting. I guess when there is foreclosure action on a mortgage it is no longer a debt burden for that particular household? So if millions of people walk away from their mortgages and car payments that would lower the household debt levels. Is this about right?

[Smallc]

This is interesting. I guess when there is foreclosure action on a mortgage it is no longer a debt burden for that particular household? So if millions of people walk away from their mortgages and car payments that would lower the household debt levels. Is this about right?

You can't walk away from a mortgage in Canada.

[GostHacked]

You can't walk away from a mortgage in Canada.

Even if one declares bankruptcy?

[Smallc]

Even if one declares bankruptcy?

Well, then you've already had the debt problem explode....but I'm not even sure if you can then in most cases.

[Shady]

Keep in mind that "household debt" includes both mortgages and consumer debt. As the CGA report makes plain, about 70% of consumer debt is in mortgages and about 30% in consumer debt (probably cars). These numbers have not changed dramatically over the past few years.

Exactly. I guess I added to our consumer debt by buying a car last August. I also have never missed a payment, and have no problem making them.

Bush_Cheney is apparently down on Canadians for not defaulting on their mortgages and car loans. Unlike in America, the Canadian government hasn't had to borrow trillions of dollars to pay for people's bad mortgages and credit card debt.

U.S. home foreclosures hit record high in April

Link

[msj]

Wow, msj. In Californian, you have issues.

I may be wrong, but do I deserve such vitriol?

You are so intellectually dishonest and you misrepresent my POV so often, yes, you do deserve that.

Or perhaps I should wise up to your troll ways and put you back on ignore?

Define the "right circumstances"?

When the net benefit from borrowing the money exceeds the net cost.

According to this report, have Canadians gone beyond this limit?

According to this report many Canadians are obviously in jeopardy. This does not mean all or even a majority, but enough so that we should all be concerned.

If I didn't find you so intellectually dishonest maybe I would dissect the report in detail - but since you are I'm not going to waste my time with such details.

[msj]

Keep in mind that "household debt" includes both mortgages and consumer debt. As the CGA report makes plain, about 70% of consumer debt is in mortgages and about 30% in consumer debt (probably cars). These numbers have not changed dramatically over the past few years.

Exactly. I guess I added to our consumer debt by buying a car last August. I also have never missed a payment, and have no problem making them.

Yeah, go figure you'd both agree.

Read the study and, golly gee, going from 16% to 19.4% for debt to assets ratio and from 120% to 144.4% for debt to income ratio (since 2006 - i.e. the past few years) - nah, that's not much change in the past few years.

Bush_Cheney is apparently down on Canadians for not defaulting on their mortgages and car loans. Unlike in America, the Canadian government hasn't had to borrow trillions of dollars to pay for people's bad mortgages and credit card debt.

Well Canada's RE bubble hasn't burst yet so the jury is still out on Canada's banking system.

[Shady]

Read the study and, golly gee, going from 16% to 19.4% for debt to assets ratio and from 120% to 144.4% for debt to income ratio (since 2006 - i.e. the past few years) - nah, that's not much change in the past few years.

Well Canada's RE bubble hasn't burst yet so the jury is still out on Canada's banking system.

There is not RE bubble, and there is no problem with the Canadian banking sytem. You need to meet certain specific requirements to gain access to a mortgage. There is no such thing as a no-income, no-job, mortage, like what existsed for sometime in certain American banking institutions.

And on the larger issue of debt. You can't qualify for car loans if you're debt level is too high, and your income level is too low. There are certain standards one has to meet. A personal debt to income ratio of 120% or 144% is impossible to achieve. You're not going to be able to borrow any money from anyone with even half of that type of ration. It's a fact.

[msj]

There is not RE bubble, and there is no problem with the Canadian banking sytem. You need to meet certain specific requirements to gain access to a mortgage. There is no such thing as a no-income, no-job, mortage, like what existsed for sometime in certain American banking institutions.

You obviously don't know much about Canada.

Yes, at one time, you could get an equivalent NINJA loan in Canada. That has more or less ended effective April/2010.

Talk to a mortgage broker about being self-employed prior to this time and how one was able to get around the rules.

And on the larger issue of debt. You can't qualify for car loans if you're debt level is too high, and your income level is too low. There are certain standards one has to meet. A personal debt to income ratio of 120% or 144% is impossible to achieve. You're not going to be able to borrow any money from anyone with even half of that type of ration. It's a fact.

That's funny - you can't qualify if your debt level is too high. Ha, that's why Canadians have debt levels that are as high as Americans.

But lets believe in a fantasy and ignore the hard data which shows that 144% is, indeed, the typical household debt in Canada (per figure 5).

Hey, Shady, maybe read the report before commenting on it and you won't appear so foolish.

[Born Free]

You obviously don't know much about Canada.

Yes, at one time, you could get an equivalent NINJA loan in Canada. That has more or less ended effective April/2010.

Do tell us what Canadian Chartered Banks ever issued the equivalent of a NINJA loan....what was the product called in Canadian Bank terms?

[msj]

Do tell us what Canadian Chartered Banks ever issued the equivalent of a NINJA loan....what was the product called in Canadian Bank terms?

I'm not sure exactly who initiated the loan.

What I do know is that I have many self-employed clients who have mortgage balances that are easily 6-8 times their gross income and I know they used mortgage brokers who helped them get such loans.

I also know that the mortgage broker received my clients tax returns (since I faxed them to them) and managed to get such absurdly high mortgages for my clients despite seeing the tax returns.

My clients then informed me that they got a "no doc" (i.e. no documents) mortgage.

This means they got their high mortgages by not having to submit the documentation that regular folks use to get mortgages. The mortgage broker will see the tax returns but the lender doesn't.

I also had a recent encounter where a mortgage broker phoned me up to convince me to pad the income on my client's income tax return. My client needed higher income since he was now under the new rules (post April/10) and had to show his tax return.

I haven't seen this client since that time since I refused to take part in padding his income so I don't know what happened.

I have had many discussions over the years about the stupidity of paying more income taxes in order to get a higher mortgage. Such people are truly stupid for taking on more debt than they should while also paying more income taxes - but these people exist.

I think very few Canadians have any idea how easy it was to get a mortgage with little documentation.

The media really should do an anonymous interview with a Canadian mortgage broker and report it since it might wake up some people.

[Shady]

Yes, at one time, you could get an equivalent NINJA loan in Canada. That has more or less ended effective April/2010.

No. Otherwise we'd be having the same foreclosure problems America has faced. That hasn't happened.

Talk to a mortgage broker about being self-employed prior to this time and how one was able to get around the rules.

Well, the vast majority of home-owners aren't self-employed.

That's funny - you can't qualify if your debt level is too high. Ha, that's why Canadians have debt levels that are as high as Americans.

If you're including mortgages, then of course the percentage will be high. Unless you expect people to earn twice as much as their home is worth per year.

[Shady]

Obama in Canada Finds World’s Best Financial System

Link

[Oleg Bach]

Even if one declares bankruptcy?

It used to be if you declared yourself inslovent-- unable to pay your debts..it would cost you a few hundred bucks and it's done! Now it cost you a few thousand along with hidden fees...kind of like having the the big blood sucker had a smaller straw to the little blood sucker...much like these collection agents that you never had a contract with ---buy ---your ensured debt from a major lender and attempt to collect money that will never go to who rightfully deserves it- but will go to an interloping third party...I* used to tell collections guys to get lost---I told them I have no contract with them...and that I am not a slave to be bought and sold through the buying and selling of my debts..they always go away once you let them know that you know the system and it is not legitimate.

[Guest TrueMetis]

Even if one declares bankruptcy?

To my knowledge yes, even if you declare bankruptcy. A family member recently did this and still has to pay off a mortgage. Divorce sucks always get a prenupt.

[msj]

No. Otherwise we'd be having the same foreclosure problems America has faced. That hasn't happened.

Hasn't happened yet.

Granted, with our recourse loans (Alberta is more like the US in that they tend to have more non-recourse mortgages - not as many as in the US but a lot higher than the rest of Canada) I doubt our foreclosures will be as high. (There are other reasons why I doubt Canada would be as high as the US but these details aren't worth going into).

Well, the vast majority of home-owners aren't self-employed.

Sure, but enough people are to fudge enough numbers.

And it's not just self-employed getting mortgages. Getting consumer credit has been easier and easier for everybody to get. Hence the increase in indebtedness per the study (like, duh).

If you're including mortgages, then of course the percentage will be high. Unless you expect people to earn twice as much as their home is worth per year.

If you would read the study then you would know what we have been talking about in the first place.

[Shady]

Hasn't happened yet.

Ok, you keep holding your breath!