DANA FLAVELLE BUSINESS REPORTER
Canadian families are richer than ever — on paper — but they're also
carrying more debt, most of it in the form of mortgages on their homes, a
new study shows.
Canadian families' net worth — a measure of what they own compared to what
they owe — has jumped 23.2 per cent after inflation over a six-year period
to $148,400 per family, Statistics Canada said yesterday in a survey of
financial security. The figure represents the median, with half of families
owning more and half owning less.
`Canadians' total assets, including everything from homes to stocks and
bonds, added up to $5.6 trillion, or 1.4 times as large as the estimate in
1999, mainly due to favourable economic conditions, a strong real estate
market and a rebound in the stock market, the study said. All of the
billions lost in the high-tech market meltdown to 2002 had been recovered by
2005, the study noted.
In comparison, Canadian households' total debt was $760 billion, nearly 1.5
times as large as in 1999, mainly due to the higher cost of purchasing a
home and an increase in the proportion of families with a mortgage, the
study said.
The report reached no conclusions about its findings. But economist Doug
Porter suggested it paints a pretty healthy portrait of Canadian households'
financial situation.
"One of the great untold stories is household assets have grown
dramatically. Households are in a pretty good position," said the senior
economist with BMO Nesbitt Burns.
While that may be cold comfort to the most highly leveraged households —
those with no room to wiggle if a job is lost or pay is cut — he said there
are "few red flags on the economic horizon."
Despite rising debt loads, he said, Canadians continue to enjoy low interest
rates, good job growth and rising real estate values for their homes.
The authors of a Bank of Canada survey that also touched on the issue of
household debt reached a similar conclusion.
"Overall, this analysis broadly supports our past conclusion: Canadian
households seem to be in rather good financial health," the bank said in its
financial system review.
The central bank study found that even though some measures of debt loads
are rising, Canadians' ability to carry their debt has improved, due to the
increased use of personal lines of credit, more competitive mortgage rates
and the use of variable rate mortgages.
But behind these broad-brush figures lurk sharp inequities between rich and
poor, with the poorest households losing ground while richer families gained
over the period under study, Statistics Canada said.
The families with the lowest net worth in 1999 lost another $6.3 billion,
for a decline of 70.3 per cent by 2005, the study found.
Per family, their median net worth was just $1,000, the study said.
Meanwhile, the families with the highest net worth gained 43.1 per cent to
end the period with $3.4 trillion. Per family, the median net worth was
$862,900, the study said.
"These differences reflect the extent to which wealth distribution is
uneven," Statistics Canada said in its report.
For all Canadians, home ownership played the biggest role both in
determining their assets and their debts, the study noted.
The median value of those homes was $180,000 per household. The median
mortgage was $90,000, the study said.
Just over one-third of families surveyed reported having this kind of debt,
the study found.
Private pension plans — including employer plans, registered retirement
savings plans and registered retirement income funds — were the second
largest contributor to household wealth, the study found, accounting for
18.5 per cent of all assets.
The second largest source of debt was secured personal lines of credit, the
study found. Lines of credit more than doubled during the period to roughly
$68 billion in total, accounting for 9 per cent of all debt.
The median value per family ballooned to $9,000 from $5,200, much of it
secured against the principal residence, the study said.
Statistics Canada also reported:
* Loans on vehicles rose 41.3 per cent to $46 billion.
* Credit card and instalment debt rose 58.4 per cent to $25.8 billion.
* Student debt edged up 15.8 per cent to $20 billion.
Canadian families are richer than ever — on paper — but they're also
carrying more debt, most of it in the form of mortgages on their homes, a
new study shows.
Canadian families' net worth — a measure of what they own compared to what
they owe — has jumped 23.2 per cent after inflation over a six-year period
to $148,400 per family, Statistics Canada said yesterday in a survey of
financial security. The figure represents the median, with half of families
owning more and half owning less.
`Canadians' total assets, including everything from homes to stocks and
bonds, added up to $5.6 trillion, or 1.4 times as large as the estimate in
1999, mainly due to favourable economic conditions, a strong real estate
market and a rebound in the stock market, the study said. All of the
billions lost in the high-tech market meltdown to 2002 had been recovered by
2005, the study noted.
In comparison, Canadian households' total debt was $760 billion, nearly 1.5
times as large as in 1999, mainly due to the higher cost of purchasing a
home and an increase in the proportion of families with a mortgage, the
study said.
The report reached no conclusions about its findings. But economist Doug
Porter suggested it paints a pretty healthy portrait of Canadian households'
financial situation.
"One of the great untold stories is household assets have grown
dramatically. Households are in a pretty good position," said the senior
economist with BMO Nesbitt Burns.
While that may be cold comfort to the most highly leveraged households —
those with no room to wiggle if a job is lost or pay is cut — he said there
are "few red flags on the economic horizon."
Despite rising debt loads, he said, Canadians continue to enjoy low interest
rates, good job growth and rising real estate values for their homes.
The authors of a Bank of Canada survey that also touched on the issue of
household debt reached a similar conclusion.
"Overall, this analysis broadly supports our past conclusion: Canadian
households seem to be in rather good financial health," the bank said in its
financial system review.
The central bank study found that even though some measures of debt loads
are rising, Canadians' ability to carry their debt has improved, due to the
increased use of personal lines of credit, more competitive mortgage rates
and the use of variable rate mortgages.
But behind these broad-brush figures lurk sharp inequities between rich and
poor, with the poorest households losing ground while richer families gained
over the period under study, Statistics Canada said.
The families with the lowest net worth in 1999 lost another $6.3 billion,
for a decline of 70.3 per cent by 2005, the study found.
Per family, their median net worth was just $1,000, the study said.
Meanwhile, the families with the highest net worth gained 43.1 per cent to
end the period with $3.4 trillion. Per family, the median net worth was
$862,900, the study said.
"These differences reflect the extent to which wealth distribution is
uneven," Statistics Canada said in its report.
For all Canadians, home ownership played the biggest role both in
determining their assets and their debts, the study noted.
The median value of those homes was $180,000 per household. The median
mortgage was $90,000, the study said.
Just over one-third of families surveyed reported having this kind of debt,
the study found.
Private pension plans — including employer plans, registered retirement
savings plans and registered retirement income funds — were the second
largest contributor to household wealth, the study found, accounting for
18.5 per cent of all assets.
The second largest source of debt was secured personal lines of credit, the
study found. Lines of credit more than doubled during the period to roughly
$68 billion in total, accounting for 9 per cent of all debt.
The median value per family ballooned to $9,000 from $5,200, much of it
secured against the principal residence, the study said.
Statistics Canada also reported:
* Loans on vehicles rose 41.3 per cent to $46 billion.
* Credit card and instalment debt rose 58.4 per cent to $25.8 billion.
* Student debt edged up 15.8 per cent to $20 billion.
