Canadian household debt is far higher than previously thought relative to income, Statistics Canada’s historical revisions showed on Monday.
A new record!
The main reasons for the revisions were that the new methodology resulted in a higher calculation of household credit market debt and lower disposable income. Statscan also removed non-profit institutions serving households from the household sector when making its estimates.
The soaring debt levels, fueled in part by a hot housing market, have led Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty to warn Canadians repeatedly against getting too deep into debt at a time of ultra-low rates.
The problem is that interest rates are so low – young 20 and 30 year olds have never seen double-digit interest rates (I haven’t paid lower than 5% for a mortgage being a home-owner), so the appetite for debt is everywhere.
What is the answer?