With average debt levels trending back toward worrisome highs, Canadians say paying down what they owe isn’t just a financial priority this year — it’s the financial priority.
Toting record amounts of personal debt, Canadians in a new CIBC survey say repaying loans is their principal financial goal of 2015. It is the fifth year in a row respondents have made that their chief aim, as average debt levels have continued to trend higher.
“The poll results also show that retirement planning is declining in importance compared to more immediate financial concerns,” CIBC said in a release.
Nearly a quarter of survey respondents cited paying down debt as their No.1 money-related goal this upcoming year, up from 16 per cent in 2014. The second most important financial task this year is building savings.
Record borrowing
Spurred by record low interest rates following the recession, Canadian consumers are more in debt than ever before. Data released earlier this month from Statistics Canada showed total borrowing rose 1.5 per cent in the latest quarter.
As a result, the amount of money collectively owed by Canadian households versus what we take home – the closely watched debt-to-income ratio – has ticked to a new record high.
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Following a big run-up dating to before the recession, that ratio had begun to trend sideways in recent quarters, with economy watchers holding out hope that the gap between incomes and debt burdens would narrow.
It hasn’t. “Household debt risks are heating up once again,” TD economist Leslie Preston said in Dec. 15 research note.
Mortgage debt climbed 1.8 per cent in the third quarter to $1.17 trillion, while debts built up on credit cards and other forms of non-mortgage debt, such as auto loans, ticked 0.9 per cent higher, to $515 billion.
On the plus side, alongside soaring real estate values booming stock markets have (until recently) helped lift Canadians’ net worth by a “healthy” 2.8 per cent, Statscan said. But with oil’s crash leading markets lower, many households are poised to see a dip in net worth.
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High debt levels are a bigger worry, TD’s Preston said. “More concerning in the rising level of household indebtedness after a period where it had seemed to plateau.”
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