Canadians: Debt Kings of the G7, Oops

Unfortunately, we're swimming in debt

Canada has more household debt than France, Germany, Italy, Japan, the United Kingdom and the United States

The latest numbers from Canadian Mortgage and Housing Corporation (CMHC) show that Canadian households owe more than any other G7 country.

That means Canadians have more debts than people living in France, Germany, Italy, Japan, the United Kingdom and the United States;

And the amount we owe is more than the value of the entire Canadian economy.

Household debt now sits at 107 percent of GDP (gross domestic product,) up from 80% in 2008.

In contrast, Germany, one of the most productive countries in the world, has total household debt equal to 59 percent of its GDP.

It’s part of a disturbing trend in runaway debt that keeps growing despite recent lending rate increases.

Last December, Statistics Canada reported that Canadian households had $2 trillion in mortgage debt and $722 billion in other forms of debt, like credit cards and car loans.

That amounts to $1.83 of debt for every dollar of household disposable income.

Households can manage these debt loads when incomes are stable.

But as soon the economy tanks or someone loses their job, things can go sideways fast.

Benjamin Tal, an economist with CIBC, says housing unaffordability and Canadian obsession with home ownership are at the heart of Canada’s growing debt problems.

Tal told CBC News, “The situation is getting worse and worse and worse, so we have to treat it as a crisis.”

 “When many households in an economy are heavily indebted, the situation can quickly deteriorate, such as what was witnessed in the U.S. in 2007 and 2008,” warns CMHC deputy chief economist Aled ab Iorwerth. “But, in the event of a severe global economic downturn, Canada’s high household debt will be a vulnerability.”

One way to ease the risk would be to improve housing affordability by building more housing or renovating rental housing would prevent Canadians from feeling compelled to be homeowners.

We’ll see if Premier Eby’s new housing can ease the burden.