Posted 9.27.13 @ 10:25
Most Canadian monthly debt payments are starting to drop, especially when compared with American debt payment rates. Canadian debts may be higher than their American cousins but they’re also repaying them in record time – a 30 year mortgage for example will be paid off within 12 years of the debt being taken out. According to the Bank of Montreal the average monthly payment dropped from $1140 to $986 compared with a year ago, a major milestone. Another important thing to note is that a year ago only 74% of Canadians had debts, while this year 83% have debts. Canadians may not be becoming debt free but getting trapped in a circle of paying off revolving debts instead.
Younger Canadians Increasing Their Debt Load
While the amount Canadians are paying towards their debts overall is beginning to decrease, certain segments of the population are taking on much more debt than expected. Younger Canadians are seeing a 40% growth in consumer credit card debt and are spending up to 30% more than the average trying to pay it back off. This is also the group that’s usually not able to qualify for a mortgage to buy real estate; the exception being the market hunting for luxury homes for sale.
Debt Payments Shrinking Down Overall
But even factoring in a couple groups that are seeing a jump in their debt payments, the amount Canada is spending overall on debt is going down across the board. Generation Xers in general is seeing a huge drop in how much they’re paying monthly to their debts.
One of the most interesting things is that taking into consideration credit card debts, mortgages and other private debts (including education related debts) the numbers are still dropping. This frees up more Canadians to save more or spend to stimulate the economy, but it may also be an indicator that a jump in interest rates is on the horizon as well.
Those Holding Debt Going Up
The amount of Canadians holding debt has also increased, which may be a sign that the Millennials have reached the age where they can borrow or that more people are cash strapped. A certain amount of debt can be a healthy thing, but when everyone is holding thousands if not tens of thousands in consumer debt, it’s not a great sign.
While many future homeowners are out hunting for homes, the more debt they hold can come back to haunt them; if you’re thinking about buying a home and you’re paying $1,000 to your debts every month, you may have trouble getting a mortgage.
Seniors Burdened by More Debt
Those 60 and up tend to spend up to 3x as much on their debt payments as any other group – especially those that are leaning on home equity loans for their retirement. This is the fastest growing segment of the Canadian population having to borrow money; it says something when this group is spending more on their debts than younger Canadians that fall in the Gen Y and Millennial groups.
Either way, across the board most Canadians are spending less than $1,000 a month on their debt payments. Many are taking on more debt though, especially seniors. If you fall into one of these groups it’s important to get your debts under control – talk to a financial advisor or a consumer credit counselor.
Contact us today to find out how we can help you!