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moneysense.ca, 11/12/06
Wealth of Canadians: Debt
This is the third in a series of posts discussing a Statistics Canada survey on the Wealth of Canadians. The first two posts cover net worth and assets.
69.4% of all households reported having some form of debt and the median debt was $44,500. Mortgages, with a median value of $90,000, were the biggest debt carried by Canadians but surprisingly only 34% of households had a mortgage on their principal residence.
Other significant forms of debt were vehicle loans (25.8% of family units with a median of $11,000) and lines of credit (25% of households with a median value of $9,000). For the vast majority of Canadians, credit card debt doesn’t seem to be a problem: though almost 40% of families reported carrying credit card debt, the median amount was only $2,400. Student loans (median of $9,000) were carried by 11.8% of households.
As you might expect, the debt burden decreased with age: the under 35 group reported $39.40 of debt for every $100 in assets and 18.5% had no or negative net worth. The 35 to 44 age group had $23.67 in debt and 4.4% had no or negative net worth.
You can access the full Statistics Canada report here.
moneysense.ca, 11/12/06
That statistic about only 34% of Canadians having a mortgage is amazing. I live in the states and it is the opposite, only 34% of households DON’T have a mortgage iow 66% do have a mortgage. Makes me think that Canadian Real Estate is a lot cheaper relative to median earnings, or Canadians are a lot more conservative in managing finances, or that Canadians live at home longer than in the States. Any thoughts?! Really an amazing difference between the 2 countries… Adam
Adam… here in Canada a mortgage is not tax deductible like it is in the states (although to compensate, when we sell our primary residence we do not pay capital gains) and our interest rates are generally a point or two higher than yours. Since our taxes are higher than yours, that means a very large difference in spreads.
For you guys, you might have a 4% mortgage and you save taxes, knocking it down to a 3.2% return if you accellerate your mortgage payments. For us, we’d likely have a 5% mortgage, which gives us a 6.25-9% return, depending on our tax rates, and makes it a quite viable option compared to conservative investments like GIC’s.
Adam: I was a bit surprised about the mortgage statistic as well. I’d second Steve’s opinion that Americans might carry the mortgage longer because it is tax deductible debt.
Canadians might also be a bit more conservative about real estate. You need a 25% down payment to avoid mortgage insurance and 25-year amortization is more common here (If I am not mistaken for Americans it is 20% and 30-year).
I don’t know how home-equity lines of credit work in the US. Here the line of credit is broken out separately from the mortgage but I suspect that Americans can roll the line of credit into their mortgage.
It seems to me the 34% number is misleading and the percentages expressed in the “Assets” part of this report seem to contradict the 34% number.
In the first case I think it important to realize that the report seems to be saying that 34% of the people surveyed owe the median of 90k(course I could be readin that wrong)
However even if I am, one need add the 24.9% listed in Credit Lines which the report states are often attached to the principal residence to arrive at a more realistic number. That would bring the aggregate to 58.9% as opposed to the 34% represented.
Secondly, If you run the numbers in the asset part of this report the percentage is 64% as opposed to 34%.
As a private lender I am reasonably certain the latter number is much more realistic as I know few people who own their principal residences outrightin thne 45 and under bracket.
This is only one article (link below) that corroborates my above post. If one adds the % of principal secured debt the numbers are about where they are in reality from my experience when it comes to the majority of people and their personal finances. So don’t feel bad if you aren’t “free n clear”!
http://www.canequity.com/mortgage-news/archive/2006/2006-03-28_CIMBL-42_canadian_mortgage_holders_happy.stm