Putting Household Debt into Perspective
Canadian households currently owe more than $2 trillion. Our average debt to income ratio increased to 170%, making us number 1 among the G7 countries. 🙂
But do we actually have too much debt? Well perhaps not. Comparing Canada to the G7 group conveniently omits other highly developed countries. Australia’s national broadcaster claims its country has a household debt to income ratio of 200%. And reports of Netherlands, Denmark, and other Nordic countries are even higher than that! So in reality Canada is far from being the most indebted country in the world.
The cost of borrowing also affects the degree to which people will go into debt. For example, in the U.S. a typical mortgage today would cost about 4.5%. But in Canada you can get a mortgage for only 3.0%. If the debt is cheaper to service then people will be naturally inclined to borrow more. 🙂
There’s a whole slew of other economic, legal, and political variables that make it nearly impossible to accurately compare household debt from one country to another. These kinds of comparisons would never be published as a scientific study because you have to correct for way too many variabilities. But they make for intriguing headlines nonetheless. 🙂