Canadian household debt is through the proverbial roof
According to a recent report from the Bank for International Settlements, Canada has one of the world’s three most imperilled banking systems. Canadian household debt is through the proverbial roof, and understandably, the BIS’s warning might invoke unpleasant memories of the financial crisis a decade ago.
It’s for that reason, then, that one Toronto mortgage broker believes recent government intervention in the housing market might not be such a terrible thing.
“I definitely think, lately, there’s more concern and emphasis put on the debt load Canadians are carrying,” said Daniel Johanis, a DLC Mortgage Centre broker. “The IMF was the first one to come out and say Canadians are carrying quite a high debt load, so it doesn’t surprise me, but I think in the case of the B-20 guidelines, it’s probably helping us to maybe take a step back and reevaluate our household debt.”
Whether or not government intervention in the market saves Canadians from themselves remains to be seen, but in the interim, Johanis says refinances are on the rise.
“From my perspective, and my portfolio, what I’m seeing is there’s quite a few of my clients who I’m rushing to do refinances not necessarily as a debt consolidation, but for renovations. I’m noticing more clients are opting to stay put and do those renovations on their homes, and it’s shifting the percentage of my portfolio of purchase versus refinance or switch in transfer. I’m seeing a few more of those than at this time last year.”
Canadians reinvesting in their homes is what Johanis calls “good debt.”
“It’s a form of good debt. They’re taking those proceeds and investing it back into their homes and renovating them. Sometimes it’s to increase their liveable space, but as a vehicle it’s also to help the curb appeal for when they do sell, so overall it’s a good strategy.”
There’s no consensus on the gravity of Canadian debt, though. Yesterday, Scotiabank’s Brian Porter regaled a University of Toronto conference with what he called a different perspective than the IMF’s, stating that they should look at the “other side of the balance sheet,” which he says have remained apace, and in some cases exceeded, those overall debt levels.
