Canadian seniors in debt

Despite years of warnings from the Bank of Canada and others, Canadians' addiction to debt shows no sign of waning. A new report from Canada Mortgage and Housing Corporation (CMHC) shows that the ratio of household debt to income hit a new record high of 178.5 percent in the final quarter of 2018.

There were some signs of moderation (or pullback) in the housing market during the course of the year.  The number of transactions and the average price were both lower than in 2017 as tighter mortgage eligibility rules began to bite.  The average size of new mortgage loans declined by just under 4 percent, though the average value of all outstanding mortgages actually rose by 3 percent.

The rise in the debt/income ratio is mainly attributable to continuing growth in non-mortgage debt.  CMHC reports that mortgage borrowers' non-mortgage borrowings (mainly via credit cards and the pernicious Home Equity Lines of Credit, or HELOCs) rose faster in 2018 than in the preceding year.  This was particularly noticeable in Vancouver and Toronto, where homeowners were cashing in on the rising equity in their homes, but also, more surprisingly, in Edmonton, where the travails of the energy sector may have forced some homeowners' hands.

Encouragingly, CMHC reports that overall delinquency rates remain low, but the report does draw attention to one worrisome trend.  Over the past four years, the age cohort that has shown the most rapid rise in delinquency rates is the over-65s -- yes, the good old baby boom generation.  It used to be rare for people to carry mortgage debt into their retirement years, but the self-indulgent boomers have put an end to that.  The airwaves are full of offers to encumber the family homestead in order to keep that unaffordable lifestyle in place just a few years longer -- "let your home lend a hand", as one such advertisement has it.   

In effect the boomers (my own cohort) are distorting the housing market six ways to Sunday.  Some  are setting up "The Bank of Mom and Dad" to get the kids on the housing ladder, which mainly serves to keep prices artificially high.  Some are staying in their homes for many years longer than used to be customary because of the lack of affordable and desirable smaller accommodation.  And some are loading debt onto the family home, a sure-fire way of robbing the kids of their inheritance.  It's little wonder that younger generations, watching their elders refuse to go gentle into that good night, expect to have a lower living standard than their parents.