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Research Update: Average Canadian Household Debt Up, Buoyed by Alberta, B.C. Levels

Aug. 15, 2014
5 mins
A bunch of young woman working on a project together at work

Household debt ratcheted up significantly for the average Canadian, according to recent research from BMO.

BMO's Annual Debt Report shows the average household debt across Canada increased to $76,140, from $72,045 a year earlier. But the debt explosion in Alberta and British Columbia was far ahead of other provinces, skewing the average figure considerably.

Residents of Alberta owe $124,838 on the average, representing a whopping 40 percent increase over last year and the highest provincial debt load nationwide. British Columbia, saw the average debt increase 26% to $99,834. Meanwhile Ontario, which includes roughly 40% of Canada's population, saw household debt shrink from $76,970 to $67,507. Ontario's 12% debt decrease was outdone by the Prairie provinces, which recorded a $13,000 decline or 17% decrease to $68,437.

Increasing housing prices and the resulting higher mortgages are partly responsible for Albertans' higher debt burden, reported BMO. It's worth noting that 53% of those in Alberta carry mortgage debt in comparison to the national average of 43%.

It's no surprise that the low interest rate environment is fuelling increased debt levels for some Canadians including first-time buyers entering the real estate market. Interestingly, new buyers in the 35 to 44 age group are more vulnerable to a rise in interest rates according to a study from RBC, which used household debt and home price data between 1999-2012 from Statistics Canada. RBC found that those in this age category were most likely to be purchasing their first home in the 1999-2012 period at higher prices and even though the mortgage rates were low, home prices were more leveraged, meaning they were not able to pay off the debt as quickly as older age groups. The August 2014 study also found this group to have higher levels of line-of-credit debt and vehicle loans, and may have used equity in their homes as security for other kinds of consumer spending.

But not all the research data is grim. Another recent survey from CIBC also found that just over half of 1,509 respondents were taking advantage of the current low interest rate environment to pay down their mortgages faster. There were, of course, differences in expectations from province to province as to when a mortgage would be paid off. For example, residents in Alberta expected to be mortgage-free by the age of 55 compared to those in B.C. who expected to burn their mortgages at age 66. Quebecers expect to be mortgage-free by 56, followed by residents in Atlantic Canada and Ontario who estimated by the age of 57 and 58 years was the figure offered by those in Manitoba and Saskatchewan.

Of those Canadians paying off their mortgage faster, the survey found 32% were making payments more often, 28% were increasing the amount they pay and roughly 18% made either an additional prepayment or a lump sum payment.

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