When was the last time you got a raise — one that you felt really made a difference in your month-to-month routine of bill-paying, kid-raising and home-running?
According to Statistics Canada, in the average household debt is growing faster than disposable income (the amount of income left over after taxes.) Now the average Canadian owes a record high of nearly $1.53 for every dollar of disposable income. That’s up from just under $1.50 per dollar of disposable income in the previous three months.
And if that doesn’t sound dire enough, consider that Mark Carney, Governor of the Bank of Canada, noted earlier this week that household debt is the biggest economic risk in our country, and our debt situation is worse than in the UK and the United States.
Worse than the United States? Now that’s scary. Who hasn’t seen news footage of boarded-up houses, abandoned because their owners couldn’t cover their mortgage payments.
If you’ve been following the US economic crisis, you know that the situation is a little different. Lenders offered a huge number of what’s called subprime mortgages – home loans to people who traditionally would be considered too high-risk (insufficient income, bad credit rating) to get the thumbs-up.
But is our situation really much different? I look around at the way some of my peers are living and, well…. I don’t get how they afford their $800,000 homes, two automobiles plus insurance costs, luxury handbags and whatnot. These are people who make good money, but probably not enough to support their lifestyles. Yet they, too, were approved for huge mortgages, ones that will also be in crisis if interest rates rise significantly.
What’s your take: Are Canadians headed for an economic fall? What do you think needs to change in order to prevent a US-style crisis?
Photo by ~Twon~ via Flickr