A new report by the Certified General Accountants Association of Canada shows household debt in Canada kept rising through the recession and peaked in December at $1.41 trillion. (It has risen further year to date in 2010.)
That's $41,740 on average per Canadian, or debt-to-income ratio of 144 per cent. Canada ranks first in terms of the consumer debt-to-financial assets ratio among 20 OECD countries examined.
Remarkably oblivious to their present peril, a full 60 per cent of Canadians whose debt levels rose felt they could still manage or take on more obligations.
It seems Scotiabank has succeeded in convincing the masses that “you are richer than you think.” Can’t someone convince BNS how predatory and revolting their marketing moniker has become?–enough already! BNS you banks are the rich ones, the rest of the country is broke!
The share of debt represented by revolving credit (personal lines of credit and credit cards) within total consumer credit issued by chartered banks grew from 21.1 per cent in 1989 to 77.7 per cent in 2009. Borrowing through personal lines of credit increased 25 fold within this period of time.
Revolving credit leaves the borrower most susceptible to adversity from rising interest rates. The trouble is interest rates are only just started into a long recovery back to the normal range some 3 to 5% above where they are today. The report points out that even a 2 per cent increase in rates would mean mid-income and higher-income households would have to slash spending on non-essentials by between 9 and 11 per cent. Oh what fun…
Cory’s Chart Corner
“An explosive critique about the investment industry: provocative and well worth reading.”
“Juggling Dynamite, #1 pick for best new books about money and markets.”
“Park manages to not only explain finances well for the average person, she also manages to entertain and educate, while cutting through the clutter of information she knows every investor faces.”