Canadians carrying higher debt than their incomes-TD

 Canada, 6th November: Canadians are earning less and spending more, warns a recent report by TD Economics.

Canada, 6th November: Canadians are earning less and spending more, warns a recent report by TD Economics.

And seeing the trend of overspending among Canadians, it appears imminent that this problem is going to worsen in the near future in case the banks keep interest rates low, the report maintains.

The increasing financial vulnerability of nearly 6.5 percent Canadian families compelling them to pay around 40 percent of their total income towards payment of service debt, cautions TD Bank’s chief economist Craig Alexander.

Personal indebtedness of Canadians is becoming overwhelmed, the report maintains and it is proving to be a cause of serious concern.

Mark Carney, Governor of Bank of Canada, also shares his thoughts with Alexander regarding slower economic recovery of the country.

Carney showed concern about increasing levels of personal debts among Canadians and stressed on an immediate need for constant checks on consumer borrowing for regulators and legislators.

However, there still remains an increased onus on the part of Canadians to ensure payment service debts, asserted Carney.

There has been a three-fold increase in the household debt as a percentage of personal income since the 1980s. So, presently, the Canadian household debt in terms of personal disposable income has gone up from 50 percent to 146 percent showing an alarming rate of increasing debt since the year 2007.

The factors responsible behind such an increase include a stable Canadian economy with a stability in the job market, increase in household income of Canadians and low rate of inflation all of which have together instilled greater confidence among Canadians to pile on higher personal debts.

In fact, Canadians seems to have become a part and parcel of Canadian households especially for those wanting to buy cars and homes, states, a web-development director Adrian Lebar who admits making $980 mortgage payments after a period of 15 days for making down payments towards his Toronto home bought last year. In addition, Lebar also pays around $300 towards car debt every month.

Lebar intends to clear off his personal debt in the period of next 25 years if he continues to be true towards his payments schedule.

Nonetheless, Lebar feels his financial condition to be much better than many Canadians, especially those at lower-income levels.

According to Alexander, the low-income families in Canada having highest ratio of debt-to-income are the most vulnerable since they are more prone to worst economic shocks and at a greater risk of losing their jobs as they lack a sound base of assets to fall back upon in case of financial distress.

Hence, the Canadian government must exercise due care before introducing stiff measures as the Canadian economy is passing through tough times, the report summarizes.