Recession fails to dampen Canadians' enthusiasm for debt

Rapid rise in mortgage rates could require major belt-tightening, warns CGA-Canada report

VANCOUVER, May 11 /CNW/ - The Great Recession has done little to dampen Canadians' enthusiasm for taking on debt, says a new survey-based report by the Certified General Accountants Association of Canada (CGA-Canada). Nearly 60% of respondents whose debt had increased - and 92% whose debt decreased or stayed the same - still felt they could either manage it well or take on more debt.

Where Is the Money Now: The State of Canadian Household Debt as Conditions for Economic Recovery Emerge is available at www.cga.org/canada/debt

"This report is another indication of Canadians' readiness to consume today and pay later," says Anthony Ariganello, President and CEO of CGA-Canada. "The concern is do they understand the full cost of paying later?"

The report is based on a national survey conducted in early 2010. Among its findings:

    
    -   Household debt in Canada reached a new high of $1.41 trillion in
        December 2009. If household debt was spread among all Canadians, each
        person would hold more than $41,740 in outstanding debt - an amount
        2.5 times greater than 1989.
    -   Canada ranks first in terms of debt-to-financial assets ratio among
        20 OECD countries and its debt-to-income ratio reached 144% by the
        end of 2009.
    -   If the mortgage rate goes up by two percentage points, mid-income to
        mid-to-high income families may be required to tighten their budgets
        by cutting an estimated 9% to 11% from 'other expenses', if they
        wanted to maintain the same levels of spending on shelter, taxes,
        food and transportation.
    -   78% of respondents said they would not change their savings patterns
        to build or rebuild a financial cushion they believed right for them.
        Some 14% said they had decreased their usual rate of savings because
        they had less confidence in the financial markets and growth
        opportunities.
    -   Personal lines of credit absorb some 60% of consumer credit issued by
        chartered banks.
    

"Canadian households' use of financing is one of the few things that did not noticeably adjust to a changing economic reality," says Rock Lefebvre, Vice-President of Research and Standards at CGA-Canada and co-author of the report. "The growth in household debt has been strong during good times and showed remarkable resilience during challenging times."

Ariganello says that some people wisely consolidate their credit card debt and replace it with a lower-cost line of credit.

"And that's a sensible move," he says. "But it's still debt. You don't want to hang onto it any longer than necessary."

ABOUT CGA-CANADA

Founded in 1908, the Certified General Accountants Association of Canada serves 73,000 Certified General Accountants and students in Canada and more than 80 countries. Respected accounting and financial management professionals, CGAs work in industry, finance, government and public practice. CGA-Canada establishes the designation's certification requirements and professional standards, offers professional development, conducts research and advocacy, and represents CGAs nationally and internationally.

For further information: or to request an interview, please contact: Taylore Ashlie, Director, Communications, CGA-Canada, Cellular: [phone], Email: [email protected]; Diana Sorace, Communications Advisor, CGA-Canada, Telephone: [phone], Email: [email protected]