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High Debt Loads Holding People Back

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Despite the efforts many Canadians are making to dig themselves out of debt, roughly a quarter say their situation remains “overwhelming.”

Worse yet, more than half (53%) are living paycheque to paycheque, according to the BDO Canada Affordability Index.

The survey does a deep dive into people’s debt loads. Some insights:

  • 4 in 10 Canadians have non-mortgage debt totalling $20,000 or more.
  • Among the 75% of gen-Xers with debt:
    • 1 in 4 (23%) have between $20,000 and $40,000 in non-mortgage debt
    • 59% carry a credit card balance and 55% have a mortgage (vs 38% of millennials and boomers/seniors).

Meanwhile, the percentage of Canadians with debt rose across all credit categories compared to last year’s figures:

  • 45% have mortgage debt (up 5%)
    • This seems to imply 1.85 million more people got a mortgage in 2019, which is high given only about 13 million people have a mortgage
  • 57% have credit card debt (up 4%)
  • 40% have car loan(s) (up 8%)
  • 32% have line(s) of credit (up 4%)
  • 18% have a Home Equity Line of credit (up 6%)

Mortgages remain the biggest debt for most people. Those especially vulnerable to rising levels of debt include women, gen-Xers (those between the ages of 35 and 54), families and Canadians with lower incomes (less than $50,000), the survey found.

Homeownership Still a Priority

High debt levels coupled with rising costs of living and overpriced housing markets are keeping an increasing number of non-homeowners out of the market.

Nearly three quarters of non-owners (72%) are unlikely to purchase a home in the near future due to the above reasons, the BDO survey found.

Nearly half (47%) of all millennials listed buying a home as their top financial challenge.

A third (35%) of millennials and 37% of gen-Xers said mortgage costs are a financial challenge.

Homeownership Outlook Not All Doom and Gloom

Despite the challenges, many Canadians are achieving homeownership. For families with children, a full 70% are homeowners. That’s up 7% compared to 2018, according to the survey results.

But it requires sacrifices along the way. The number of those delaying paying off their mortgage is up 6% this year to 19%, while those postponing paying off their credit cards rose 7% to 39%.

“When families cannot afford a home down payment or struggle to make the mortgage payment each month, it affects the whole financial outlook of a household,” noted Doug Jones, President of BDO Canada Limited. “There is often a give-and-take between immediate and long-term priorities.”

That’s a problem on many levels, not the least of which are lost opportunities for equity appreciation and forced savings, both of which homeownership provides.