BC homeowners carry heaviest burdens in Canada
(TORONTO, ON) – When it comes to mortgages, more and more Canadians are in over their heads. According to a recent report from the C.D. Howe Institute, mortgage debt was at least 500 per cent of disposable income in 10 per cent of households in 2012, compared to just 3.4 per cent of households in 1999.
The report suggests that the heaviest mortgage burdens belong to younger, lower-income Canadians, with west-coasters leading the way:
- British Columbia’s average mortgage debt-to-income ratio was 375 per cent in 2012.
- Ontario had the second-highest at 350 per cent.
- Young households with ratios above 300 per cent have increased by almost 27 percentage points.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says it is clear that young families are having trouble keeping up with sky-rocketing real estate prices in Canada’s major cities.
“Young Canadians are jumping into the deep end with a very expensive anchor tied to them,” says Schwartz. “It’s going to be very difficult to stay afloat.”
Schwartz points to further data in the report which shows that one-in-five Canadian households have less than $5,000 in financial assets to use in the event of a job loss or other financial emergency; one-in-ten has less than $1,500.
“Your emergency fund is your financial life jacket,” says Schwartz. “You hope you will never need to use it, but it’s incredibly dangerous and short-sighted to go without one.”
In order to keep housing finances upright, Schwartz and the team at Consolidated Credit offer the following advice:
- Can you swim? Consolidated Credit recommends that housing costs should exceed no more than 25 per cent of your monthly income. Print out a budget worksheet and know your finances inside and out.
- Try the shallow end. Homeownership is a goal of many young families, but buying too much home (in cost or in size) will mean a larger mortgage payment with higher taxes and utility bills. If you are approved for a certain mortgage amount, dial it back so that you have extra breathing room.
- Build your life raft, bit by bit. You never know when a storm will strike – unemployment, illness, or disability can come out of nowhere. Try to save three-to-six months’ worth of emergency savings. You can achieve this by automating your savings and adding to your fund every payday.
- Lose any dead weight. Don’t waste money on high-interest credit card debt. Adding an extra $50 or $100 to your monthly payment will dramatically reduce the amount of extra time and money you will spend in repayment. See for yourself by using our credit card debt calculator.
About Consolidated Credit Counseling Services of Canada, Inc.:
Consolidated Credit Counseling Services of Canada is a national non-profit credit counselling organization that teaches consumers about personal finance.
For more information or to request an interview with Jeffrey Schwartz, please contact:
Jacob MacDonald, Manager of Community and Public Relations, Consolidated Credit Counseling Services of Canada, Inc., T: 416-915-7283 ext.1041, C: 647-390-5253, F: 416-915-5200, E: [email protected]