Canada's Household Debt Hits Alarming Heights, Surpassing GDP and G7 Nations
1.5 min read.
Canada’s household debt has reached alarming levels, surpassing the size of the country's economy and outpacing G7 nations. The ongoing rise in interest rates further exacerbates concerns about financial difficulties. A report by the Canada Mortgage and Housing Corporation emphasizes the long-term implications of high debt levels, particularly in relation to interest rate trajectories. While the previous decade experienced historically low interest rates, there is no guarantee of a return to such conditions after addressing current high inflation. Moreover, if assessments regarding increased investment demands for addressing aging populations, infrastructure needs, and manufacturing reshoring prove accurate, elevated interest rates may persist. Consequently, the risks to Canada's economy remain elevated as household debt levels continue to grow.
The report highlights that approximately 75% of Canada's household debt stems from mortgages, with increasing home prices adding to the mounting debt burden. Addressing housing affordability is crucial to reduce household debt and enable Canadians to become homeowners. With an average home price of around CAD $716,083 and cities like Toronto and Vancouver ranking among the most unaffordable globally, the challenges in attaining affordable housing are evident. Notably, Canada's household debt now exceeds its GDP by 7%, presenting a sharp contrast to the decreasing household debt-to-GDP ratios observed in the US and the UK.
Supported by recent statistics from Statistics Canada, which indicate a rise in mortgage interest costs and higher rent prices contributing to increased consumer inflation, the urgency of addressing the implications of high household debt levels and the overall economy becomes even more apparent.
References
Consumer price index, April 2023. Statistics Canada. (2023, May 16). https://www150.statcan.gc.ca/n1/daily-quotidien/230516/dq230516a-eng.htm
Iorwerth, A. ab. (2023, May 23). Exploring the impacts of household debt on Canada’s economy. Canada Mortgage and Housing Corporation. https://www.cmhc-schl.gc.ca/en/blog/2023/risks-canadas-economy-remain-high-household-debt-levels-continue-grow
Yousif, N. (2023, May 24). Canada’s household debt is now highest in the G7. BBC News. https://www.bbc.com/news/world-us-canada-65688460
About Westhaven Group
WHERE INTEGRITY AND RELIABILITY MEET.
Westhaven Group oversees a collection of companies involved in managing and trading over 600,000 square feet of real estate across the City of Toronto and surrounding areas.
With multiple years of experience in the industry, our team works within residential and commercial spaces ensuring every aspect of real estate investment is covered.
Westhaven Group is a go-to source for all of your company needs.