Canadian Homeowners Carrying Average of $154,090 in Mortgage Debt

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The FINANCIAL — Canadian homeowners are carrying an average of 190,000 Canadian dollars($154,090) in mortgage debt as home prices in some urban markets reached new heights, says a new survey to be released on June 16, according to Nasdaq.

The poll, the first such one commissioned by Manulife Bank of Canada, a division of Manulife Financial Corp., provides updated insight into the debt loads of homeowners. The findings come at a time when Canada’s central bank is warning that household debt remains a top risk to the country’s financial system.

Homeowners in the western province of Alberta, an energy-rich region that has borne the brunt of the tumbling oil prices, carry the highest average mortgage debt at C$242,300, according to the survey. That is of potential concern because cities such as Calgary, Canada’s energy capital, have been stung by layoffs at oil companies and falling home prices in recent months.

Despite concerns about Canadian debt loads, about 40% of homeowners made an extra mortgage payment or stepped up the amount of their payment in the past year in a bid to pay down their debt faster, the survey said. Although the majority succeeded in reducing their debt, many must choose between paying off debt and saving for retirement.

“What was encouraging from our survey is that the percentage of the people who were paying down their mortgages proactively more than they were required to was more weighted to the larger cities of Toronto and Vancouver,” said Rick Lunny, President and Chief Executive Officer of Manulife Bank of Canada, in an interview.

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Home prices in cities including Vancouver and Toronto continued to climb last year, which is partly why consumers there are shouldering more debt, he said. In British Columbia and Ontario, average mortgage debt totaled C$217,300 and C$193,000, respectively, the survey found.

Nearly 80% of consumers listed becoming debt-free as a high priority, with 70% of those surveyed saying if their debts were fully paid off tomorrow they would earmark at least some of their extra money to savings.

Even with record low interest rates, the Manulife survey shows nearly a third of mortgage holders would struggle to make payments within three months if their family’s primary breadwinner lost his or her job. Roughly the same amount would find it difficult to make mortgage payments if the amount increased by just 10%.

That means those Canadians “are really living day-to-day on their mortgages, in terms of not being able to save,” Mr. Lunny said.

On June 12, Statistics Canada said the household debt ratio fell slightly to 163.3% in the first quarter down from a high of 163.6%. The household debt service ratio, meanwhile, remained near a record low while household net worth climbed.

The Manulife survey comes on the heels of a poll released on June 15 by the Bank of Montreal showing that 40% of Canadians don’t believe that interest rates will rise over the next five years.

“Hopefully, many have not been lulled into thinking that rates will never go up, as they could be tempted into taking on too much debt,” said senior economist Sal Guatieri in a release.

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