Warning Over Household Debt Escalating

As the low rate of interest helps drive the longing for credit, more Canadians are lending more cash without any precautions whatsoever. The non-mortgage loans have gone up in the second quarter of this year from what RBC reported; most especially the auto loans and lines of credit where balances had a huge difference of 2.6 percent from the same period during last year.

Even the mortgage loans expanded as well, with an added 6.2 percent that was borrowed in the second quarter of last year, quite different compared to the year before as the price of houses went up. An economist at RBC, Laura Cooper debated whether the increase of debt may be maintained throughout to help boost the economy of Canada with assumptions that there no surprises to be expected anytime soon. If the rate of unemployment goes up or a change occurs in the economy of the country, the high household debt will likely have a great influence.

An economist at RBC, Laura Cooper debated whether the increase of debt may be maintained throughout to help boost the economy of Canada with assumptions that there would be no surprises anytime soon. If the rate of unemployment goes up or a change occurs in the economy of the country, the high household debt will likely have a great influence.

Cooper penned down: “Should a shock materialize that leads to a housing market correction, the large run-up in household debt indicates a ‘more severe and longer-lasting’ decline in household consumption that would otherwise have been the case.”

Canadians have a debt of $1.65 for each dollar of income, while RBC said that the highly-leveraged homes percentage (where the ratios for the debt-to-income are higher than 350 percent) has now gone up to 21 percent from the previous 13 percent in the past, before the slump.