Why Canadians Rely On Debts And How Its Affecting The Economy
With incomes failing to keep up with the inflation, engaging in debt is the only solution to keep up and unfortunately, they really are tapping into family networks as well as the bank.
As hard as it is to keep pay debts, most Canadians are picking up the habit, and the main reason is that debt, by historical standards, is dirt cheap. Unfortunately, we are getting too used to it being that way and too many of us expect it will stay that way.
Math Zagaris, a young 32 year old with a decent job as a marketer and IT specialist in Montreal, finds himself getting worried over the debt issue the young generation are facing in Montreal. “My friends in Toronto are buying condos for $600, 000 and taking on huge mortgage debt without thinking, and when it comes to car ownership, the talk is all about the rates. It’s not about ‘can I afford that $50,000 car?’- It’s about ‘can I afford the $500-a-month lease payment?’ Borrowing is the only way a lot of them can afford big-ticket items and I worry.”
The Canadian news reported, “According to the poll, just nine per cent of the Silent Generation (those 75 and older) have borrowed large sums of money from friends and family. In contrast, 34 per cent of Gen-Xer poll respondents say they’ve done so. “Coming out of the depression the Silents just didn’t have much and likely neither did their families,” says Heather Franklin, a certified financial planner in Toronto. “Plus, Baby Boomers have a higher net worth than previous generations so it’s easier for Gen-Xer and millennials to borrow from them. They know it’s there if they need it.”
Debbie Gillis, from K3C Credit Counseling in Kingston, Ontario, says that he isn’t surprise at these findings and says that Canadians are borrowing in three main categories. “First and foremost, they’re borrowing for mortgages on their houses and putting home Renos on a line of credit, says Gillis.
“Secondly, they’re borrowing to finance cars and trucks because most Canadians just don’t have the money to pay for a vehicle outright anymore, and finally, for students loans, which is another big-ticket item that if they haven’t saved for a few years, they will have to get loans for.”
69 per cent of household debt in Canada is made up of residential mortgage debt, while 18 per cent comes from lines of credit and five per cent is credit card debt, according to the Canadian Bankers Association.
People don’t think of credit cards as borrowing or debt anymore, they don’t look at using their credit card to pay for pizza as borrowing. Nor do they think of overdrafts as forms of borrowing either. It’s all just seen as cash flow.”
