Numbers from Equifax in September 2021 confirmed what we have known for some time now that Canadians are addicted to mortgage debt. There are now more mortgages than ever before; which in and of itself is not a bad thing; but the amount of debt is significantly larger pro rata than any time before. The average new home loan was for $355,000 during the second quarter of 2021 – the highest on record and a whopping increase of 20% vs. the same time 2020.

Canadians now owe over $2.15 Trillion in consumer debt which is more than the value of the entire Canadian economy. This will be a problem if interest rates rise even slightly as an increase can quickly turn into a large increase in what a consumer needs to pay on their payments.

Currently the market holds a lot of speculative behaviour and the belief that markets will always go up. Some could argue there is a buffer of protection from rising rates from the stress test which indeed if all other market conditions remained the same then protection would be garnered.

Asides from mortgage debt – Home Equity Lines of Credit (HELOC)’s have increased by 57% vs. a year ago to the highest point in 10 years. This HELOC trend is worrisome as most of these payments are tied to variable rates. In 2018 when interest rates started trending upwards in Canada, we saw a drop in credit card payments especially among consumers with a HELOC which led to higher bankruptcies in older consumer demographics with a HELOC. Now combine these higher rates with the soaring increased costs of living we are experiencing at this time with lower than inflation increases in wages and many Canadians may find themselves behind the 8ball and not able to maintain their standards of living or credit solvency.