Sunday March 15, 2015
Are Canadians dangerously in debt thanks to expensive housing and cheap credit?
Experts and the International Monetary Fund have sounded an alarm about Canada's overheated housing market and high levels of personal debt. Are high house prices and cheap, easy credit encouraging reckless behaviour? Are Canadians dangerously overextending themselves? With guest host Suhana Meharchand.
GUESTS & LINKS
TWITTER & EMAIL
DOWNLOAD MP3 (right click, choose 'Save Target/Link As')
Two reports released this week told Canadians something they've known for years, that house prices are high and so are the levels of debt being carried by most households. The reports, one by the International Monetary Fund and the other by Statistics Canada raised the alarm that this country could be headed down a path towards a day of economic reckoning. If house prices tank and most household debt is secured by those prices then many families would suddenly find themselves in difficulty.
But the alarm is not universal. Experts from bank economists to political leaders say, 'yes the figures are a cause for concern but they are not beyond repair by careful and prudent correction.'
It's a view that is shared obviously by many Canadians because the alarm has been sounded before, and not much as changed other than a continuing rise in house prices and in levels of household debt. Low interest rates means those high-priced houses don't seem so out of reach, and financing them is relatively painless. So, why worry? The real test comes when interest rates go back up.
Not everyone who wants to become a homeowner takes the plunge. In several cities, particularly Vancouver and Toronto, house prices are so high that many simply cannot afford to buy a house. What does it mean if a sizable number of Canadians are shutout of owning a home? Is there more of an affordability crisis than debt crisis?
With house prices so high, people really have only four choices:
1. going deeper into debt
2. deciding to rent instead
3. moving further afield for cheaper houses and commuting to work
4. opting for shared arrangements
What choices are you making?
House prices are high but are expectations too high too? People used to wait and save for a house and now because credit is so cheap and easy, why wait and why go for a fixer-upper when a little more credit will get you your dream home now?
On the debt side ...are people less worried about carrying debt? If you have debt, do you have a structured plan to pay it off, or is that something better put off until later? We want to hear about your thoughts on the challenge of managing debt too? Should regulations be tightened to protect people from themselves?
Our question today: "Is expensive housing and cheap credit driving Canadians dangerously into debt?"
I'm Suhana Meharchand ...on CBC Radio One ...and on Sirius XM, satellite radio channel 169 ...this is Cross Country Checkup.
Executive Director of Credit Counselling Services of Newfoundland and Laborador, a personal credit counselling group in St. John's
Deputy Chief Economist of CIBC World Markets Inc.
- High consumer debt reflects 'laissez-faire' attitude to borrowing
- Consumer debt rose by 7.7% in 2014, Equifax report says
- Mortgage Rule Crackdown Spurring Move to Uninsured Lending, IMF Warns
- CMHC CEO says low rates won't put stress on overvalued housing market
- Toronto, Vancouver house prices pull national average up 6.3% to $431K
- Overvalued housing prices and how to read them: Don Pittis
- Homes Prices Slide in 8 of 11 Major Markets in February
- Harper Dismisses Reports of a Canadian Housing Bubble
- Housing Market a Bubble Set to Burst, Hilliard Macbeth Says
- Stephen Poloz says up to 30% overvalued housing big risk to economy
- 'Shadow banking' such as subprime mortgages growing, but still a tiny slice, by Amanda Lang
- Home prices slide in 8 of 11 major markets in February
- Bank of Canada might not follow Fed when rates increase
- Canada's housing market in for 'soft landing': IMF (Nov. 26, 2014)
- Ottawa caps CMHC mortgages at 25 years (June 21, 2012)
- Canada only lost 1,000 jobs in February, as jobless rate ticked up to 6.8%
- Canadians carrying debt into retirement
- Canada household debt ratio hits new record of 163.3%
- Canadians don’t want to hear about debt, they’re too busy spending, by Kelly McParland
- Only mass default will end the world’s addiction to debt
- IMF Raises Red Flag About Canada's Overheated Housing Market
- Why Finance Minister Joe Oliver Isn't Intervening in Canada's Housing Market
- Spring Comes Early to Hot Housing Markets in Toronto, Vancouver, Realtors Say
Globe and Mail
- Household debt hits new high as country's financial stability questioned
- IMF Calls for More Data, Higher Standards, in Canada's Housing Market
- RBC Ceo David McKay Bullish on Canadian Housing
- Housing Starts Fall Sharply in February
- Million Dollar Club: Average Cost of A Detached Toronto Home Tops 1 Million
- Canadian Housing: There Have Clearly Been Corrections in Progress
- Smaller Canadian Cities Grapple With Surplus of Unsold Condos
- New Alarm Bells Ringing Over Household Debt
- High household debt lurks as a major threat to Canadian economy
- Attack Your Household Debt Before the Damage Compounds
- If Buying a House is a Financial Stretch, Keep Saving
International Monetary Fund