TORONTO, ONTARIO--(Marketwire - July 17, 2012) - More than half of Canadians (54 per cent) expect to be debt-free by 2017 and the new mortgage rules announced by Minister of Finance Jim Flaherty will help more Canadians achieve that goal, according to BMO Economics.
The rule changes - which took effect July 9, 2012 - include reducing the maximum amortization for government-insured mortgages to 25 years from 30 years. The amortization period is the length of time it will take to pay off an entire mortgage.
"The most recent indicators show that overall household debt growth has moderated to its slowest pace in more than a decade (up 4.7 per cent from a year ago in April), and only slightly above the trend in personal income growth. We expect that the combination of the new mortgage rules and some underlying moderation in borrowing will soon help cap Canadian household debt as a share of income," said Doug Porter, Deputy Chief Economist, BMO Capital Markets.
According to data from Statistics Canada, residential mortgages - typically considered 'good debt' as it is tied to household assets - accounts for 63 per cent of household liabilities, while consumer credit makes up approximately 28 per cent.
The BMO survey, conducted by Leger Marketing, revealed that 54 per cent of Canadians expect to be debt-free in five years. The survey results also showed:
- The average household debt load in Canada, including mortgage, credit card, line of credit and loan debt, is $112,329
- One-quarter (26 per cent) of those who carry debt say that their debt load exceeds $100,000
- While 25 per cent of Canadians are debt-free, 41 per cent say that they have taken on more debt in the past five years, with increased spending and buying a new car being the top two reasons why their debt has risen in the past five years
Su McVey, Vice President, BMO Bank of Montreal, noted that BMO offers tools and products Canadians can use to track their household finances and save. "For example, BMO MoneyLogic allows Canadians to track and review their spending limits and savings goals in real time. Once you have a clear idea of where your money is going, it makes it easier to course-correct where you may be over-extending and put a savings plan in place," said Ms McVey.
The BMO Household Debt Report was conducted by Leger Marketing and compiled via on-line survey questions from April 2 to April 5, 2012 using Leger Marketing's online panel, LegerWeb, with a sample of 1507 Canadians. A probability sample of the same size would yield a margin of error of ± 2.5 per cent, 19 times out of 20.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.