FCAC warns of risk of over-borrowing with home equity lines of credit

OTTAWA - A report by the Financial Consumer Agency of Canada is warning that home equity lines of credit may be putting some Canadians at risk of over-borrowing.

FCAC commissioner Lucie Tedesco says HELOCs may lead Canadians to use their homes as ATMs, making it easier for them to borrow more than they can afford.

Borrowers may also be more vulnerable to economic shocks such as a job loss or an interest rate hike.

Economists and policy-markets have named household debt as a key risk for the Canadian economy with debt-to-income ratios at a record high.

The FCAC said the number of households that have a HELOC and a mortgage secured against their home has increased by nearly 40 per cent since 2011.

It also noted that 40 per cent of consumers do not make regular payments toward their HELOC principal and 25 per cent pay only the interest or make the minimum payment.