Did you know that the actual definition of “peruse” is to read thoroughly or carefully? How many times have you used it incorrectly in your life? Probably like a hundred, but we don’t blame you. It’s certainly one of the most misused words (by adults) in the English language, right up there with ironic and literally.

However, when we say we’re perusing the CMHC’s Canadian Housing Observer, we really mean it! We’ve combed through this huge document, extracting the essential points so you don’t have to. This way you’ll be abreast of all the pertinent Canadian housing market info, while avoiding spending hours poring over the 150+ page report yourself.

We’ve got part one of our ongoing perusal right here and part two is just one click away as well. In part three, we take a look at the key points in the chapter on household indebtedness. Enjoy!

  • This chapter analyzes the vulnerability of Canadian households to adverse economic shocks (interest rate increases, job loss etc…)
  • The Bank of Canada is concerned about household indebtedness and has issued warnings to Canadians to properly assess their ability to service their debts
  • Household indebtedness is comprised mainly of residential mortgages, in 2010 these mortgages represented about 68 per cent of total household debt. The highest level of mortgage debt recorded in Canada was 75 per cent in 1993.
  • Household liabilities increased faster than assets, net worth and disposable income in the 2000-2010 period
  • The estimated proportion of financially vulnerable Canadian households with positive debt was about 6.5 per cent in 2010. This is above the average over the 1999 to 2010 period, but below the proportions in 2000 and 2001.
  • The Bank of Canada uses a measure of “financially vulnerable” households that encompasses households which spend 40 per cent or more of their gross income on total debt payments. It also includes the impact of an economic shock on the distribution of the household debt-service ratio and loans in arrears of financial institutions.
  • Concerns over household indebtedness have been largely motivated by total household debt-to-disposable income ratio
  • The major risk in the mortgage market is impairment in a household’s ability to pay, often due to job loss
  • Household financial vulnerability remains a serious issue that merits close attention going forward

Stay tuned for more from the Canadian Housing Observer later this week!

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