Rising rates are not stopping Canadians from borrowing – and they do so at their collective peril, the Credit Counselling Society warned late last week.
Latest data from Statistics Canada indicated that the national household debt-to-income ratio swelled to 173.8% during Q3 2018, a warning bell for Canadians to begin considering cutting down on their spending lest they fall into near-inescapable debt pits.
“It is projected that the Bank of Canada will continue to raise interest rates, and many Canadians may find it difficult to keep up with rising mortgage and other debt payments,” CCS president Scott Hannah said.
The current pace of borrowing makes people even more vulnerable to these debt holes in the worst-case scenario.
“If there is a period of slow economic growth in the future, Canadians could face job losses or decreased income putting them in an even worse position to manage their increasing debt levels,” Hannah added.
Read more: Insolvency increasingly weighing upon Canadian households
Equifax numbers showed that overall Canadian consumer debt increased by 5.4% annually during Q2 2018 to reach $1.864 trillion. Mortgage loans accounted for 66.5% of this total debt load.
And despite the quarter seeing 11.9% fewer borrowers compared to the same time last year, the value of mortgages (up by 3.7% to an average of $205,980) and the overall number of active mortgages (up by 1.3% to approximately 6 million) trended towards the opposite direction.