Warning issued over Canadian consumer debt
Posted February 23, 2012 6:24 pm.
This article is more than 5 years old.
The latest cover story in Maclean’s magazine contends Canada is seeing a debt bubble worse than anything witnessed stateside before their housing collapse.
The headline in the latest issue states “You are about to get burned.”
Although there is no way to see the future, Canadians have made themselves financially vulnerable.
On average, Canadians owe $1.53 for every dollar that they brought in, up 40
per cent in the past decade. Much of the debt is built on a skyrocketing real estate market. Home prices have doubled in ten years and risen 13 per cent since 2008.
But Andrew Pyle, a wealth advisor with ScotiaMcLeod, told 680News interest rates would have to shoot up to 3 or 4 per cent in rapid fashion to put Canadians in danger
“The other thing that we would have to see is the economic situation in this country would have to deteriorate sharply. We would have to see unemployment rates in this country go up even higher,” said Pyle.
BMO Deputy Chief Economist Doug Porter told 680News the Bank of Canada’s hands are tied for now.
“The big problem here is we’re dealing with a situation where the U.S. interest rates are even lower, effectively at zero, and they look like they are going to be there for a couple years,” he explained.
The Central Bank issued a report, Thursday, warning that it is not necessarily mortgage debt the they are concerned but the money Canadians are borrowing using their homes as collateral. They warn that if there is a sharp correction in home prices many Canadians could be in trouble.
