Media Advisory - The fragile state of Canadian family finances

"For far too many, there is too little income, too much spending, too little saving and too much debt."

OTTAWA, Feb. 16 /CNW/ - The Vanier Institute of the Family says while the recession may "technically" be over, it will be a long and challenging recovery for Canadian families.

In releasing its 11th annual assessment on The Current State of Canadian Family Finances, Clarence Lochhead, the Institute's Executive Director says "The effects of this recession will test the resilience of many Canadian families. While the stock market may be up, the improvement for families will lag behind in terms of employment, increases in income, and a return of net worth."

Lochhead pointed out the Institute's monitoring of family financial health over the past decade has shown it has taken Canadian families considerable time to recover from past recessions. He said "With most forecasters predicting slow growth rate for the economy over the next few years, it could take even longer for families to catch up this time, especially for the 1.6 million who are now unemployed."

The Institute's report indicates many families walk a financial high wire, citing research in which 59% of respondents say they would be in trouble if their paycheque was delayed by even a week. The two-income family is an established reality in Canada, as fully 70% of women with young children and a working spouse are working outside the home.

The study stresses that personal debt is an increasing problem at the kitchen table, with a 50% increase in mortgages running 90 days or more in arrears in 2009 compared to a year before. The number of credit card holders who were behind at least three months in their payments was up 40% during the same period.

Roger Sauvé of People Patterns Consulting, who authored the report for the Vanier Institute, also flags growing concern over a "housing bubble." He raises the point that over the past 20 years, house prices have averaged 3.7 times household earnings. Now it is 5 times earnings, with real estate now providing 48% of the net worth of Canadian households, the highest it has been in 20 years.

Sauvé warns that conditions are in place for a correction in house prices. When and by how much is the difficult question. This could be hard on many families, especially recent first-time buyers, who took advantage of record low interest rates to buy a house, and who may not fully realize what an increase in mortgage rates by several per cent will mean for their monthly payments.

VIF Executive Director Lochhead says he understands why governments are warning of cutbacks and fiscal restraint as they prepare their upcoming budgets. But he adds "As they deal with mounting deficits, governments should not abandon vulnerable Canadian families. Ten years of sagging savings followed by a decade of increased debt has left family finances in a fragile state. At the household level, this recession is not over. For far too many, there is too little income, too much spending, too little saving and too much debt."

Among other findings of the report which can be downloaded from the Vanier Institute website at www.vifamily.ca:

    
    -   In 2009 the average household debt climbed to $96,100, creating a
        debt to income ratio of 145%, the highest it has ever been. Some are
        predicting it could climb to 160% by 2012.

    -   Almost half the job losses during 2009 were lost by young people
        15 to 25. Youth now entering the labour force face a big challenge as
        only 7% of companies say they now face a labour shortage compared to
        36% a year ago; it's the lowest number since 1997.
    

For further information: For interviews and more information on this report which tracks the latest trends in incomes, spending, savings, debt and net worth across family and household types contact: Clarence Lochhead, Executive Director, The Vanier Institute of the Family, [phone] x214, [email protected], www.vifamily.ca; Roger Sauvé, President, People Patterns Consulting, [phone], [email protected], www.peoplepatternsconsulting.com