Household debt puts Canadians in 'dire' situation, CGA warns research

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Household debt puts Canadians in 'dire' situation, CGA warns


OTTAWA — Household debt has soared to a new record of $1.5 trillion, leaving many Canadians with lower or stagnant incomes in a "dire" situation, says a report Tuesday from the Certified General Accountants Association of Canada.

"The debt of a typical household is rising," said Rock Lefebvre, the group's vice-president of research and standards and co-author of the report. "And the financial situation of certain groups of households is much worse than average and continues to deteriorate. This is concealed if you focus only on the national or aggregate picture."

The report shows that more than half of indebted Canadians are borrowing money just to meet their day-to-day living expenses.

As a result, single-parent families, retirees and those with annual income of less than $50,000 "face a bleak financial situation," the report warned.

It also said that if household debt was spread evenly across all Canadians, a family with two children would owe an estimated $176,461.

Bank of Canada governor Mark Carney has warned in the past of the impact of rising Canadian debt levels, and in a separate report Tuesday, TD Economics warned that "following five years of excessive debt accumulation, Canadian households are finally tapped out."

"A continued cooling in household borrowing is expected to constrain real consumer spending to a two per cent pace over the forecast horizon," the TD report cautioned.

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The CGA report listed the following key findings:

---- ‹ Fifty-seven per cent of indebted respondents said daily living expenses are the main cause for their increasing debt;

---- ‹ More than half — 58 per cent — said their household income had remained unchanged or decreased over the past three years, while 86 per cent of those whose income did increase said it did so only modestly;

---- ‹ The debt-to-income ratio in households reached a record high of 146.9 per cent in the first quarter of 2011, compared to 144 per cent in late 2009.

---- ‹ Savings rates inched down in 2010 and continue to cause concern. Twenty-seven per cent of non-retired Canadians commit no resources whatsoever to savings, even for retirement;

---- ‹ Households with an income of $50,000 and under are six times more likely to be financially vulnerable in terms of debt-service ratio;

---- ‹ The single-parent family is the only category where debt increases with age. Those families have two-thirds more debt than couples with no children;

---- ‹ More Canadians are carrying debt into retirement, with one-third of retired households carrying an average debt of $60,000 and 17 per cent carrying $100,000 or more.


Household debt puts Canadians in 'dire' situation, CGAwarns