Canada’s Household Mortgage Debt Reaches New Heights

It seems like every day, we hear more about the growing concern of interest rates and the pressures it puts on individuals.  Mortgages and home equity lines of credit (HELOC), combined as real estate secured debt, is now at about $2.3T.  Mortgage debt alone is at $2.1T, and sadly, this is the slowest growth pace since December 2011.

This is an overwhelming experience for most households. Salaries are not necessarily keeping pace with the interest increases and expenses continue. In order to straddle the gap, individuals and families are turning to personal loans rather than incur credit card debt.  In May, personal loan plans increased by 0.7% and other personal loans increased by 0.8%. At the same time, HELOC outstanding balances dropped by 0.2%, an additional decline over the previous month.

Unlock Financial Freedom with Personal Loans

A personal loan is money from a lender (plus interest) that must be repaid in fixed amounts until it reaches zero balance.  When that loan is repaid, the account is closed.  To get more money, you take out another new loan. These services are offered by various sources like banks, credit unions, online lenders, etc.  The recipient can use the money for whatever they want.  Frequently they are used for large expenses like a family vacation, home improvements, weddings, or to pay off credit cards.

There are advantages to personal loans:

  • Budgeting is easier since you know the exact amount due each month.
  • Generally, personal loans are offered at a lower interest rate than credit cards.
  • Credit limits are often higher than credit card limits.

The downsides are:

  • Little flexibility in repayment.
  • Extra costs to establish the loan and often other fees can accumulate quite easily.
  • Missed payments reflect poorly on your credit rating.
  • Possible penalty for paying the loan off early.
  • There are no reward points, miles, or cash-back offers.

So, the details we are seeing indicate that these personal loans are the preference to tide families over until the mortgage rates reduce.  These studies show that the non-mortgage debt in early 2023 was attributed to those in the 35 to 44 age range and in lower income brackets. 

Not all is gloom and doom.  Interest rate hikes are on a temporary pause.  That caused increased home sales during this past spring.  In May, sales rose 5.1%, together with an increase in the average sale price by 1.8%.  This is a huge improvement in the real estate market.

Unlocking the Potential: Seize Low-Interest Rates

If you are interested in taking advantage of this ease in interest rates and have found a property that you believe is valued appropriately, then this is an opportunity for you to explore your options.  Visit easyhouseloan.ca.  They have a staff of experts who are able to work with you to establish a connection with a reputable lender and walk you through the process.  They are also able to speak to the advantages and disadvantages of your other established credit so that you can make an informed and rational decision.

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