It may come as no surprise to people struggling to afford living in Vancouver, but a new report says people in the city are far worse off financially than other major Canadian cities.
The Canada Mortgage and Housing Corporation (CMHC) looked at the debt-to-income of people around the country, and found that Vancouverites owe much more money than they are bringing in every month.
So how bad is it? Vancouverites owe $2.42 for every $1 they earn, according to its analysis. That’s the worst in the country.
Toronto isn’t far behind, at $2.08, or 208%. Compare that to Victoria’s debt-to-income (DTI) ratio of $1.89. The median ratio for major Canadian cities hovers around $1.70, or 170%.
Vancouver’s ratio is more than double the level in Saint John, at $1.06.
The ratio is a measure of just how vulnerable people are when it comes to their household finances, specifically how they will handle their bills if there is a change in circumstances, like interest rates rising.
The DTI in Canada hasn’t changed much over the past two years, although Calgary and Edmonton have seen their debt levels drop.
CMHC says households with a high total debt ratio usually have far fewer options when it comes to consolidating their debt service loads.
Mortgage debt is the biggest budget stressor for Canadians, accounting for about two-thirds of household debt. That debt can become crippling when rates suddenly rise, according to CMHC.
“While households may be able to service their debt during periods of low interest rates, some may face challenges when rates rise,” it says.
Personal lines of credit, credit cards and auto loans make up the rest of the bulk of Canadian household debt.
The report is based on data from CHMC, Statistics Canada, creditor monitoring firm Equifax and the Conference Board of Canada.
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