Photo: Catherine Legault Duty
On average, a canadian household in five does not have the financial cushion needed to meet its obligations by mortgage, then that third party will not take four months, according to an analytical report of the Bank of Canada released last week.
Canadians should continue to keep financial support for the coup in the face of the pandemic coronavirus, provided, however, to be able to avail themselves of all the aid promised, and that the economic recovery does not have to wait too much.
The level of indebtedness of households and their ability to meet their financial obligations in the event of an economic shock are considered, for years, as one of the main vulnerabilities of the financial system in Canada.
At a time when the economic impact of the pandemic COVID-19, and the containment measures of governments began to be felt, the debt of canadian households was 1.77 cents for each dollar of disposable income, reported on Friday, Statistics Canada’s portrait of the situation for the first quarter ending march 31. Less than its peak value of $ 1.79 reached three years earlier, this average hides a generally higher level of debt than households with more modest income and still relatively high in comparison to what it was at the same date 10 years ago (1,57 $) or in 1990 (87 ¢).
In spite of the growing number of workers condemned to unemployment-technical, the payment required means that called for these mortgage loans, lines of credit, auto loans or credit-card debt, meanwhile, despite all declined slightly from 14,81 % to 14,67 % of the income available to households. This anomaly is explained by the financial assistance of emergency that began to deploy to the governments at the same time, but also by the drop to the floor of the interest rate of the Bank of Canada and the opportunity offered to households in difficulty to ask their financial institution for a deferral of payments on some debts.
At the same time, it always pays to Statistics Canada, the rapid deterioration of the economic outlook, and may also be the containment measures, have led households to increase their savings rate from 3.6 % to 6.1 % of their disposable income, notably of “drop a record” of their spending (down 2.1 %). This alone would obviously not compensate for the losses incurred by their actions and investment funds (or 15.5 %) with the plunge of the stock markets, which have since partially rebounded.
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The Canadians are in a financial position precarious, observed the last week of the economists of the Bank of Canada in an analytical report. On average, one household in five does not have the financial cushion needed to meet its obligations by mortgage, then that third party will not take four months. The situation is even worse for workers in the sectors particularly affected by the crisis, especially in the trades, transport and sale. Gold, at last count, more than one-third of canadian workers were unemployed, had just waived his right to seek employment due to the crisis, or worked less than half their usual hours.
In this context, what are the risks of see a rapidly increasing number of Canadians trained by the bottom by the weight of their debts ? Several of them will be able to turn to their lines of credit often little-used, but this can only be a short-term solution, kept the experts of the Bank of Canada. The financial assistance programs of urgene who are nearing their term, and that the government are considering the terms of a possible extension, allow, at best, to pay the essential expenses. The reports of payment offered by the banks and expected to last for 6 months come also to give a extra boost.
Without such a set of measures, the proportion of households forced to give back the keys of their houses would increase rapidly to exceed the historical peak recorded during the recession of the early 80’s, say our experts. This worst-case scenario, however, seems on track to be avoided, although a certain increase in the rate of payment arrears on mortgages or to fear in turning to the end of the year, were they calculated based on the assumption of a full economic recovery within a year.
If all goes well, Canada will see its economy wiped a drop stunning 8% this year, followed by a modest rebound of 3.9 %, next year, has warned, on Wednesday, the Organization for economic cooperation and development (OECD) in the update of its economic forecasts. But if the misfortune is that it has a second wave of the pandemic coronavirus, the fall, this year may be rather of 9.4% and his rebounding, 2021, of only 1.5 %.