Half of Canadians expect to be debt-free by 2017???

In a Leger Marketing poll, 54% of Canadians said they expect to be debt-free in five years. The average current debt of Canadians is $112,329. Getty Images files

Is it a dream or reality? Half of Canadians now in hock expect to be debt-free by 2017 and that includes their mortgage, a new Bank of Montreal study says.

In a Leger Marketing poll, 54% of Canadians said they expect to be debt-free in five years. The average current debt of Canadians is $112,329.

Men are more likely to carry large debt, with 30% saying they owed more than $100,000, compared to 22% of women. Those in the age group of 35-44 are also the mostly heavily in debt, with 43% saying they owe more than $100,000.

“While debt is a part of life for the majority of Canadians, it doesn’t have to be a permanent fixture,” said Su McVey, vice-president, BMO Bank of Montreal. “While interest rates have likely kept debt loads manageable for many households, that picture may be poised to change in the coming year.”

Once again, the Bank of Canada made no move Tuesday to change its key lending rate, which is tied to the prime lending rate at most financial institutions. “Some modest withdrawal of the present considerable monetary policy stimulus may become appropriate, consistent with achieving the 2% inflation target over the medium term,” the bank said. “The timing and degree of any such withdrawal will be weighed carefully against domestic and global economic developments.”

Despite the near-record-low rates, Canadians have been encouraged to lower debt levels by both the Bank of Canada and the federal government.

Clearly some Canadians are heeding the call. The BMO survey found 25% of Canadians have no debt. Only 26% of respondents with debt say they have debt load of more than $100,000. The average monthly debt payment for those in the survey is $1,138.49.

BMO cited Statistics Canada data which shows residential mortgages account for 63% of household liabilities, something it described as “good debt.” Consumer credit makes up 28% of liabilities.

While most news appears good, the survey did find 30% of Canadians “appear to be treading water,” in BMO’s words, by paying only the minimum amount they owe. This is despite the fact 70% of Canadians say they can afford to pay more than the minimum.

The online survey was conducted between April 2 to 5 and is considered accurate to within 2.5 percentage points, 19 times out of 20.

 

Author: Garry Marr