Average Canadian family debt hits $100,000
The average Canadian family is dealing with $100,000 in debt and owes far more than it earns, according to a new report.
The report, released by the Vanier Institute of the Family on Thursday, suggests the debt-to-income ratio is a record 150 per cent.
That means for every $1,000 in after-tax income that a Canadian family earns, it owes $1,500.
Katherine Scott, director of programs for the Vanier Institute of the Family, says that while standard economic indicators suggest the recession is over, Canadian families remain in a precarious predicament.
"As governments at all levels craft their budgets for the coming year and look at cutting programs to reduce their deficits, they need to be mindful that the state of Canadian family finances continues to be fragile in many households," Scott said.
Scott said Canada's average debt load crossed a "psychological barrier" when it reached the six-digit mark.
Scott said many families would have much higher debt loads than the average $100,000, and many families would have lower ones as well.
The figure includes mortgages, student loans, credit card debts and lines of credit.
"This has really sparked a debate about the role of debt. Most economists, and certainly Vanier, would point out that there is good debt and bad debt, Scott said.
"Young people going into debt to finance post-secondary education; in a sense that is considered ‘good debt.' But when the levels are so high it starts to deter people from pursuing post-secondary."
However, with historically low interest rates expected to inevitably rise, Scott says many families could be headed for a "precarious situation."
The Institute suggests the level of debt most families are dealing with has been on the rise for the past 20 years. In 1990, the average family debt stood at $56,800, with a debt-to-income ratio of 93 per cent.
When the debt ratio began to rise, the savings rate began to fall, according to the report.
In 1990, the average Canadian family put $8,000 into savings, or 13 per cent. In 2010, families managed to save $2,500, or 4.2 per cent.
Other data compiled by the Institute suggests 17,400 households were behind in their mortgage payments by three or more months in 2010, up by 50 per cent since the recession began. Credit card delinquencies and bankruptcy rates also remain higher than before the recession.