Multiple banking organizations around the world are warning the 5 main banks in Canada that Canadian debt is soaring along with rising interest rates which is a deadly combination.

The ratio of household debt to disposable income reached a record level of 171% in the 3rd quarter of 2017.

To make matters worse, almost half of mortgage will be maturing this year which means that they will become exposed to the higher rates. Consider that many of these mortgages have fixed rates so those that thought they would be protected are actually vulnerable. Those that are in variable rate mortgages have seen recent increases but their rates too will be reset since likely that are at prime – an amount greater than what they would get today.

Car loans are also problematic because the terms that are offered are so long (up to 68 months) that the value of the car depreciates faster than the balance on the loan. In other words, the car become worth less than the amount of the loan at some point.

The good news is that the country has the lowest unemployment rate in 4 decades, the arrears rate on mortgages is 0.24%  and the auto loan delinquency rate is only 1.5%. Also, Canadian banks have a good reputation for their management and conservative policies.

Luckily the Bank of Canada didn’t increase interest rates this month after 3 consecutive increases in 2017.

We will continue to monitor mortgage rates and debt in Canada and keep you posted on our projections!

Robert Floris is a licensed mortgage agent and financial planner at Mortgage Architects located in Hamilton, Ontario and serving Toronto and all of Ontario.

He can be contacted at 905-574-9200 Ext. 215 OR by email at mortgages@robertfloris.com.

Apply online at https://application.malink.ca:8112/App/MARC/FLORISR/en-ca/1896 with absolutely no pressure and no obligation.

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