Canadians are facing worrying levels of household debt, which has now surpassed all other G7 countries.
The Canada Mortgage and Housing Corporation (CMHC) reports that Canada’s household debt amounted to 107% of the country’s GDP at the end of 2021. In comparison, household debt in the US decreased from 100% of its GDP in 2008 to 78% in 2021.
The main factor behind the growth in Canadians’ debt is the cost of housing: 75% of the debt comes from mortgages, a total of $2 trillion. As a result, Canadians are most at risk of defaulting in the world.
Now the debt situation is reaching a critical point. Interest rates have risen over the past year as the Bank of Canada has attempted to combat inflation. According to CMHC, homeowners whose 5-year fixed-rate mortgages have expired now face significantly higher rates that raise their monthly payments. Combined with soaring house and rent prices and the high cost of living, many Canadians are already struggling to repay their debts.
This could put pressure on tenants’ ability to pay rent on time and in full, especially if landlords have to increase rents further to cover their own rising costs. On a broader scale, this level of debt poses a risk to the economy's stability.
Open communication and automated payment reminders enabled by property management software such as PayProp can help reduce the risk of late or missed payments.
With patience and PropTech, property managers can more easily navigate the challenges of debt-burdened tenants and maintain a stable rental business.
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Interest in variable rate mortgages drops amid higher interest rates – Calgary Herald