Canada: Despite record debt levels, Canadian call debt reduction their top financial priority

Stephen Poloz, the Governor of the Bank of Canada, has raised concerns over escalating household debt levels, putting the country’s long-term economic health at risk. According to Statistics Canada, increased mortgage debt is the main factor driving overall household debt, while RBC further cites flat disposable income growth as being a culprit.

With more interest rate hikes expected from the Bank of Canada and house prices predicted to decline during 2018, these hinder the ability to meet debt repayments among Canadians. According to RFi Group data, over a third of Canadians are concerned about their current financial situation, an increase of 6% over the past 12 months.

"According to Statistics Canada, increased mortgage debt is the main factor driving overall household debt, while RBC further cites flat disposable income growth as being a culprit."

There is, however, a conscious effort among Canadians to reduce their household debt. In a recent survey conducted by CIBC, 25% of those surveyed indicated that debt reduction was their top financial priority. While Canadians owe $1.71 for every dollar of household disposable income according to Statistics Canada, around half of those surveyed had reduced spending on non-essential items, and almost a third had made a household budget in order to meet their financial goals.

Despite the necessary adjustments, only 16% reported actually achieving their financial budget. Jennifer Hubbard, Managing Director of Financial Planning and Advice at CIBC commented “We all know how hard it is to keep New Year’s resolutions. That’s why when it comes to your finances you want to set smart goals that are specific, measurable, time-bound, and most importantly, realistic”.

 

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