# Canadians carrying 148% Household Debt Load: Less Smugness Coming Up **URL:** \ **Category:** Miscellaneous and Personal Stuff I Must Share\ **Created:** [December 14, 2010, 1:31am UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068 "2010-12-14T01:31:09Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 14, 2010, 8:47pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/21 "2010-12-14T20:47:29Z")
Well, I’d assume there are people in Toronto (and Vancouver, and … Calgary?) making under $100k buying at least $500k houses/condos … and mortgaging at least $450K of that. Even after a few years of servicing that debt, they would still be at at least 200% … assuming no other debt. Or am I getting something wrong here? ---
**Author:** ![Elendil\_s\_Heir](https://avatars.discourse-cdn.com/v4/letter/e/7cd45c/32.png) [@Elendil\_s\_Heir](https://boards.straightdope.com/u/Elendil_s_Heir)\ **Post date:** [December 14, 2010, 8:56pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/22 "2010-12-14T20:56:12Z")
American here. We own our house and a minivan, all paid off; I lease the car I use for day-to-day commuting and can easily make the monthly payments. We pay all of our credit cards every month. I also have some savings I can draw upon. Our investments have taken a beating in the past nine years, but all in all we’re doing OK, while knowing many who aren’t. ---
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 14, 2010, 9:00pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/23 "2010-12-14T21:00:41Z")
Okay - SFQ time. Any time I’ve ever seen “Debt to income ratio”, it has been relating to a debt service ratio… or percent of your income that services the debt. This can’t be that, right? Is this one calculated the way I thought? IE - If I make 100K/yr and I owe a total of 148K (mortgage, loans, etc) - then my ratio is 148% … correct? ---
**Author:** ![Leaffan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leaffan/32/299_2.png) [@Leaffan](https://boards.straightdope.com/u/Leaffan)\ **Post date:** [December 14, 2010, 9:04pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/24 "2010-12-14T21:04:51Z")
> [@ThePylon](#): > > Okay - SFQ time. Any time I’ve ever seen “Debt to income ratio”, it has been relating to a debt service ratio… or percent of your income that services the debt. This can’t be that, right? Is this one calculated the way I thought? IE - If I make 100K/yr and I owe a total of 148K (mortgage, loans, etc) - then my ratio is 148% … correct? Looks right to me. Which puts mine at about 220% right now. ETA: and that’s using _gross_ income. I’m guessing it reaches 400% if you account for all levels of taxation. (Property, Sales, Income, etc.) ---
**Author:** ![Swallowed\_My\_Cellphone](https://avatars.discourse-cdn.com/v4/letter/s/9d8465/32.png) [@Swallowed\_My\_Cellphone](https://boards.straightdope.com/u/Swallowed_My_Cellphone)\ **Post date:** [December 14, 2010, 9:23pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/25 "2010-12-14T21:23:13Z")
> [@ThePylon](#): > > Well, I’d assume there are people in Toronto (and Vancouver, and … Calgary?) making under $100k buying at least $500k houses/condos … and mortgaging at least $450K of that. That’s true, but if you’re looking at a national average, then you also have to look at the east coast where my friend, a contractor, bought a house with his credit card. We spent more having him help us renovate than he did on the entire house he just bought. Housing prices here are stupid. We were looking at houses in our neighborhood and were horrified by a _severely_ termite-damaged place. I’m not kidding, the entire back half of the house will have to be demolished if it’s still standing when they take possession. We were actually really worried about the neighbor (it was a semi-detached) because if that back half collapses, her house is going with it. It sold for almost $600K. ---
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 14, 2010, 9:28pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/26 "2010-12-14T21:28:54Z")
Well - assuming I’m correct, we’re bringing up the average, but had an employment anomoly like LeafFan’s plus are at a time in our lives where everything is all about spending… ---
**Author:** ![Cat\_Whisperer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cat_whisperer/32/4839_2.png) [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)\ **Post date:** [December 15, 2010, 6:06am UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/27 "2010-12-15T06:06:51Z")
> [@Leaffan](#): > > When your family income shrinks by 65% overnight and remains that way for a year, credit cards are pretty difficult to avoid. The fact that we were able to ride it out without going bankrupt is a testament to our frugal living arrangements. But it has been a difficult last couple of years for a lot of Canadians. And it continues to be difficult for a great many. > > Not everyone who has a higher-than-wanted debt did this to themselves. Sorry, **Leaffan** , I should have specified too that I wasn’t talking about people who have held on by the skin of their teeth in bad circumstances, but rather people who are just spending on credit frivolously because they can, without seeming to realize that those chickens are going to come home to roost. ---
**Author:** ![Cat\_Whisperer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cat_whisperer/32/4839_2.png) [@Cat\_Whisperer](https://boards.straightdope.com/u/Cat_Whisperer)\ **Post date:** [December 15, 2010, 6:23am UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/28 "2010-12-15T06:23:47Z")
> [@Giraffe](#): > > If they are including the mortgage, then I’m not sure how this is a useful statistic. In areas like the Bay Area, if people only bought houses that cost less than 150% of their annual income, only like twenty people would own houses – the rest of us would be living in a Rio De Janeiro-style shantytown. > > I think someone who has a relatively large but maneagable mortgage as being in far better financial shape than someone with the same annual income who is renting but has e.g. $50k in credit card debt. I’m not entirely sure if mortgages are included in this or not. If they are, I’m not sure if they are including the whole amount owed, or what your monthly payments are. More research required… It looks like your mortgage is not usually included: From [this site:](http://frugalliving.about.com/od/moneymanagement/a/Debt_Worksheet.htm) > [@](#): > > For an accurate picture of your debt load, be sure to include credit cards, car loans, student loans, home equity loans, personal loans, loans from friends and family, medical bills and any other type of debt that you might carry > Don’t include your mortgage on the worksheet. It’s an acceptable debt, and the last one that you’ll want to pay off ---
**Author:** ![Swallowed\_My\_Cellphone](https://avatars.discourse-cdn.com/v4/letter/s/9d8465/32.png) [@Swallowed\_My\_Cellphone](https://boards.straightdope.com/u/Swallowed_My_Cellphone)\ **Post date:** [December 15, 2010, 3:08pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/29 "2010-12-15T15:08:44Z")
> [@Cat\_Whisperer](#): > > It looks like your mortgage is not usually included: Okay, that kind of makes more sense. Otherwise the numbers would be skewed in a crazy way, depending on where you live. ---
**Author:** ![Leaffan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/leaffan/32/299_2.png) [@Leaffan](https://boards.straightdope.com/u/Leaffan)\ **Post date:** [December 15, 2010, 3:18pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/30 "2010-12-15T15:18:32Z")
That’s crazy! There are people out there who owe 1.5 times more on personal/car/home equity loans, and credit cards than they make _gross_ in a year? Not including mortgage? OK. I feel much better about my situation if that’s the case. ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [December 15, 2010, 3:36pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/31 "2010-12-15T15:36:02Z")
> [@Cat\_Whisperer](#): > > I’m not entirely sure if mortgages are included in this or not. If they are, I’m not sure if they are including the whole amount owed, or what your monthly payments are. More research required… > > It looks like your mortgage is not usually included: From [this site:](http://frugalliving.about.com/od/moneymanagement/a/Debt_Worksheet.htm) This is just what I came in to say Mortgages are generally not included in "household debt. And yes, **Leaffan** , not only are there people out there who owe 1.5 times their disposable income on **stuff other than** house mortgages, but this is the AVERAGE, so there are plenty of people who owe more. Some of this debt may also be on 2nd or “vacation” properties as well as on cars, credit cards and lines of credit. As someone with 0 household debt, this boggles my mind. Someone out there must have 3 times their household disposable income in debt just to make up for me. (disposable income is generally defined as after tax income) ---
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 15, 2010, 3:49pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/32 "2010-12-15T15:49:39Z")
Okay - here’s an interesting thing. I wasted some time looking at some Stats Canada stuff … while it is still available… A question - how realistic would it be to assume that the average Canadian’s debt total (including mortgage) is 50% of the value of their house? ---
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 15, 2010, 3:52pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/33 "2010-12-15T15:52:53Z")
> [@Leaffan](#): > > That’s crazy! There are people out there who owe 1.5 times more on personal/car/home equity loans, and credit cards than they make _gross_ in a year? Not including mortgage? > > OK. I feel much better about my situation if that’s the case. This can’t be right… if it is, I’m doing okay, but scared of what’s going to happen when interest rates go up - which is the only way they can go. The Governor of the Bank of Canada ALWAYS uses the most conservative, tight-lipped language possible as his words have such an effect. You could argue him actually saying something substantial is akin to it being screamed from the mountaintops ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 15, 2010, 4:08pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/34 "2010-12-15T16:08:28Z")
If the figure in the OP’s article doesn’t include mortgage debt, nothing else in the article makes any sense. Specifically, the bulk of the article discusses the impact of mortgages: > [@](#): > > Prime Minister Stephen Harper echoed those sentiments on Monday, saying the government is concerned about Canadians’ personal debt levels. > > Harper told a news conference in Quebec the government had already introduced changes to mortgage rules to prevent a sudden increase in debt. … > [@](#): > > However Ian Lee, a business professor at Carleton University, says the numbers are not as troubling as they appear. > > “I think we should be concerned but I do not believe we are approaching some kind of a housing meltdown or a credit meltdown,” Lee told CTV New Channel Monday afternoon. > > “About three quarters of the debt owed by Canadians . . . is owed on mortgages.” > > He says while debt is high, Canadians have much more in the way of assets, either through their homes or in savings. > > “Our debt-to-asset ratio is four to one. So we are not drowning in debt if our assets exceed our debt by a factor of four to one.” If three-quarters of Canadian’s debt is mortgages, and the 1.5 figure _doesn’t_ include mortgages - then you have to multiply that 1.5 times four to get the total debt load … am I right? That would create the absurd result that Canadians on average owe six times gross income, mortgage plus non-mortgage debt. Which just can’t be right. Also, since assets exceed debts by 4 to 1, the average Canadian owns assets worth 24 times their gross income - which is obviously absurd. OTOH, if the figures _do_ include mortgages, they are simply not all _that_ alarming. In major Canadian cities, owing more than 1.5 times gross income in mortage is hardly unusual. In Toronto, the average house goes for something like $400,000, for a small three-bedroom … ---
**Author:** ![LionelHutz405](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lionelhutz405/32/536_2.png) [@LionelHutz405](https://boards.straightdope.com/u/LionelHutz405)\ **Post date:** [December 15, 2010, 4:12pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/35 "2010-12-15T16:12:33Z")
I agree that this “debt-to-income” ratio appears to include mortgage debt. Which makes it not very useful, but still troubling that it has increased 7% in a year. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [December 15, 2010, 4:18pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/36 "2010-12-15T16:18:55Z")
> [@LionelHutz405](#): > > I agree that this “debt-to-income” ratio appears to include mortgage debt. > > Which makes it not very useful, but still troubling that it has increased 7% in a year. It’s worrisome all right, but at least according to the article, the explaination for much of it is a sudden drop in income. Since much of the debt is “fixed”, a sudden drop in income cannot be compensated easily by an equally-sudden drop in debt. ---
**Author:** ![Swallowed\_My\_Cellphone](https://avatars.discourse-cdn.com/v4/letter/s/9d8465/32.png) [@Swallowed\_My\_Cellphone](https://boards.straightdope.com/u/Swallowed_My_Cellphone)\ **Post date:** [December 15, 2010, 4:28pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/37 "2010-12-15T16:28:16Z")
> [@Leaffan](#): > > That’s crazy! There are people out there who owe 1.5 times more on personal/car/home equity loans, and credit cards than they make _gross_ in a year? Not including mortgage? There was some story we saw within the last week on either “The National” or some other CBC show, in which they interviewed some immigrants to Canada and discussed credit. They were from a country where credit essentially doesn’t exist for the average person. Oh, it exists, but it wasn’t really a part of their consumer culture. If you want to buy a house, you save up until you can then buy a house and own it outright. If you want a bicycle, you save up and buy a bicycle. You didn’t use credit for the purchase. So the family they were interviewing was really interesting. The kids are college students who grew up here in Canada. While they understand how evil credit cards can be, they don’t hesitate to use them quite liberally. The one guy is a student and there is just no way he has the income to cover his purchases. I was actually really interesting to hear the kids talk very rationally about how credit was perceived and (not)used in their parent’s culture, and how using their credit cards all the time for purchases they otherwise can’t afford is creating a huge mess, yet at the same time, they didn’t seem to be modifying their purchasing habits. The student has a nice new car, the latest technology gadgets, and utterly no way to pay for it. ---
**Author:** ![Euphonious\_Polemic](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/euphonious_polemic/32/3002_2.png) [@Euphonious\_Polemic](https://boards.straightdope.com/u/Euphonious_Polemic)\ **Post date:** [December 15, 2010, 5:30pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/38 "2010-12-15T17:30:08Z")
Terms have not been very well defined in any of the news articles I have read about this. By doing some digging, I THINK that I was wrong above, and I THINK these are the definitions being used: (but it is not that clear) Personal Debt = amount owing on credit cards, line of credit, car loans, etc Mortgage Debt = amount owing for a home you live in Household Debt or Total Debt = the amount of personal debt and mortgage debt for everyone in a household Disposable Income = Income after paying income tax, CPP and EI Debt Load = ratio of total debt to disposable income Therefore, when they talk about the average household debt load being 148%, they are INCLUDING mortgage debt. This does not seem so crazy then. The vast majority of this debt will be mortgage debt. ---
**Author:** ![ThePylon](https://avatars.discourse-cdn.com/v4/letter/t/b9e5f3/32.png) [@ThePylon](https://boards.straightdope.com/u/ThePylon)\ **Post date:** [December 15, 2010, 5:30pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/39 "2010-12-15T17:30:34Z")
Doing some numbers, and looking at house prices, I can see some sense of this number including mortgages. The median gross family income in Vancouver in 2008 was 68,710. The average house price was 679,000. If they owned half their house and mortgaged the rest, their debt to income ratio with no other debt is already at around 500%. Using the same assumptions for Toronto (300%), Calgary (225%) and Montreal (230%) would explain the variance with those with paid of mortgages and those who could buy a house with a credit card out east. ---
**Author:** ![Quercus](https://avatars.discourse-cdn.com/v4/letter/q/7ab992/32.png) [@Quercus](https://boards.straightdope.com/u/Quercus)\ **Post date:** [December 15, 2010, 6:16pm UTC](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068/40 "2010-12-15T18:16:21Z")
Totally agree this is a pretty unalarming statistic. My household has a debt to income ratio of over 200%. But it’s still in good financial shape: the net worth is positive, and the asset-to-debt ratio is I’d estimate heading towards two because all of that debt is a mortgage (for less than the current house value). But Pylon’s numbers look screwy for Vancouver. How can an income of $70,000 afford a $680,000 house? Oh, wait, median income but average (I assume mean) house price. Nice little lesson in the difference between mean and median, and how a few very large items can skew the mean high, when the median still stays low. [Previous page](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068.md?page=1) [Next page](https://boards.straightdope.com/t/canadians-carrying-148-household-debt-load-less-smugness-coming-up/564068.md?page=3)