Canadian households’ $1.5 trillion debt; two thirds of which are home loans

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The Bank of Canada may have been largely positive about the economy but Stephen Poloz’ statement yesterday in which he announced that the interest rate will stay at 1 per cent also raised concern about the level of household debt. New figures from Equifax show a $1.5 trillion debt burden for Canada’s households, with the debt load rising 7.4 per cent in the three months to the end of September compared with a year before. That works out at an average debt of $20,891 per person excluding mortgages. However, unlike the BoC, the credit agency says that it is not concerned about the levels as consumers are controlling their debt well. Of the $1.5 trillion owed two thirds is mortgage debt, totalling $985.1 billion. Read the full story.
  • Omer Quenneville on 2014-12-04 9:17:42 AM

    Except for the dreaded TD collateral mortgages and HELOC mortgage information shouldn't be reported to Equifax. How would they know 2/3s of household debt is mortgage.

  • Bob on 2014-12-04 11:20:29 AM

    mortgages are now reported on Equifax & lenders who report mortgages have the ability to see mortgages from other FIs on the bureau

  • James Robinson on 2014-12-04 12:11:58 PM

    I wonder if this amount is based on the snapshot reporting collected by Equifax? For those of us that always pay our credit card balances in full every month, the balances reported on our credit report are inaccurate as it shows the balance on the day reported. The result could be a significant overstating of debt levels in Canada. I do not use a credit card as a debt facility, but simply a way to keep my money in my possession a little longer (albeit usually in a bank account that pays no interest)

  • Layth Matthews on 2014-12-04 12:34:38 PM

    I had a deal declined the other day because the client had been a few days late on his mortgage payment once 18 months ago and a couple of other times over 24 and 36 months previous!

    These would not have shown up on the 12 month mortgage rating that has been the standard. So how long will this guy be punished? And how late was he? I don't think this shows up yet.

    Ironically, I received an immediate approval on his co-applicant alone, who has far less credit history, work history, and net worth.

    The good news is that capitalism eventually rewards the most accurate risk assessors, on average, over time, one might hope...

  • Omer Quenneville on 2014-12-04 12:52:40 PM

    In my opinion, mortgages should not show as they haven't in the past. Mortgage is not a loan, it is a shared interested in the land. We as mortgage brokers stand by and let this happen. We deserve what our future holds. This is our job and we should be united in exposing this and restoring it. The former finance minister (JIm), would turn in his grave.

  • James Robinson on 2014-12-04 1:08:06 PM

    I have to disagree with Omer. A mortgage technically is the security granted by a borrower to a lender in return for a loan. Since there are repayment terms on the loan, it cannot be viewed as a shared interest in a property. The reporting of mortgages on the CB will prevent the non disclosure of property ownership by borrowers, brokers, and bank mortgage "specialists". It does level the playing field for those originators that provide full disclosure regardless of what might or might not show up. The unfortunate thing is that this happens at a time when most lenders are taking a much more conservative approach to multiple property investors, so the borrower with millions in net worth and multiple streams of income can't get a mortgage while the 5% down, negative net worth, minimal credit and job history applicant, just flies right through the system. Fortunately, the lending pendulum will swing back in time as it always does.

  • Omer Quenneville on 2014-12-04 1:15:32 PM

    Its not an opinion, it is a fact. A mortgage is not a loan it is a shared interest and the security and default remedies are the mortgage act. And if we don't protect it, we will pay later. Home equity loans and collateral exempted, they are loans and encumber your life.

  • James Robinson on 2014-12-04 1:49:19 PM

    Beyond the remedies in the mortgage act which involve repossession of the property to realize upon the lender's security, virtually all loan agreements in Canada that are secured by real estate contain personal covenants by the borrower to repay the loan. Therefore, I would respectfully suggest, these are loans and since they have repayment terms, they must be included as a liability when assessing the borrowers ability to carry additional debt. To suggest that these should not be reported on the CB seems to suggest that they should also not need to be disclosed on applications for credit. I doubt very much that you would find any support for such a policy in the banking, government or mortgage insurance sectors, or even in the mortgage brokerage business. We all strive to help Canadians build wealth through the responsible use of borrowed money. You simply have to look south of the 49th to see what happens when a pulse is all that is required to borrow money.

  • Mortgage Guy Geoff on 2014-12-04 2:10:40 PM

    The mortgage amounts referenced in the article are the least troubling for me...what is the net worth created by the assets purchased with these loans? Quite likely a bunch more than the net worth, or should I say loss, in the assets that were purchased with this consumer debt. Certainly not all consumer debt is bad - it could be argued things like student loans, RRSP loans, and even car loans {if the car facilitates life necessities} provide some value, however in general it seems to me that this 1/3 will contribute more to one's financial hardship then the mortgage 2/3.

  • Omer Quenneville on 2014-12-04 4:02:04 PM

    Well James up to about 5 years ago, mortgages didn't show up on a CR and you didn't have to disclose. It was TD that started this with their collateral mortgage, which is not a mortgage at all really. Reporting on your CR is new. As "Mortgage guy" says, mortgage debt is the least of our problems and if we start to treat them as debt instead of a shared interest we are going to have a real problem in the not to distant future. Wake up folks, if the bank wants this, you got to know it is wrong. The bank is not your friend, in any situation.

  • James Robinson on 2014-12-04 4:42:21 PM

    Wikipedia defines debt as "A debt generally refers to money owed by one party, the debtor, to a second party, the creditor. Debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest"

    A mortgage loan is debt.

    Just because a mortgage did not show up on the credit bureau, does not mean that a borrower does not have to disclose it to a lender. When you sign an application with any lender, bank or otherwise, you attest to the fact that you have fully disclosed all of your obligations. To put it bluntly, failing to disclose a property or a mortgage is called fraud.

    I don't think that the bank, or any lender for that matter, is my friend. We are running a business and so are they. We have to understand what the contractual obligations are and to explain them in clear language to our clients. There are many reasons why a non bank lender is preferred to one of the big banks (collateral charge, fixed rate mortgage penalty calculations), but there are also many situations where the banks have superior product offerings (try to get a $2.5mm mortgage from any of the monolines).

    We as brokers have a clear advantage over the bank employees in that we have choice and actually provide unbiased advice, but we also have obligations.

  • Ron Butler on 2014-12-04 6:04:49 PM

    I am with James, we are in business relationships with lenders. Each has there own features and pricing and we match the consumer to the features and pricing that are good fits for the client.

    The mortgage credit bureau is here to stay, no point in thinking about it anymore. We might as well complain that 95% rentals need to return. Waste of time for both.

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