The Toronto Star has a story today on the ever-increasing burden that home ownership is placing on Canadians' finances.
According to Statistics Canada, Canadians owed $760 billion in total debt in 2005, three-quarters of which was in mortgages, up 43 per cent from 1999. Household debt has been increasing annually at 4.7 per cent for the past three decades, outpacing gains in disposable income.
Most of that debt is by young couples such as the Rodrigues* family, which wants to live in the city.
* The Rodrigueses budgeted $450,000 for a house, but ended up paying $700,000 for something in the High Park area. They got frustrated after losing out on a number of bidding wars.
A study released by Statistics Canada last month found young adults who lived in a rural area or small town were most likely to be homeowners at 71 per cent, versus living in a more expensive city, such as Toronto, at 53 per cent.
"It really didn't hit us till we told Hilary's parents, who are from Bowmanville and their eyes kind of widened," says Savio, 32, who works as a product manager with IBM Canada. "Her dad just said `you could buy four homes in Bowmanville for that money.'"
According to Statistics Canada, the personal savings rate in Canada is only 1.8 per cent, a number that has been falling since 1982 when it was 20 per cent.
"It doesn't take much to go off the rails, especially when Canadians have a zero savings rate," said John Podlewski, president of Burlington-based credit counsellor Debt Freedom Canada Inc. ...
Will Dunning, chief economist for the Canadian Association of Accredited Mortgage Professionals, estimates a 1 per cent increase in mortgage rates would "not have a huge impact" on the market. However, if mortgage rates were to go 2 per cent higher, it would have an effect, Dunning said.
That means you would likely see a spike in mortgages in arrears, with owners walking away from homes they can't afford.