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Canadians overall paid about $9 billion more in interest charges in 2017
Environics Analytics says rising housing prices are inflating the net worth of the average Canadian, but higher interest rates and debt are putting pressure on discretionary spending.
In a new analysis, it says Canadians overall paid about $9 billion more in interest charges in 2017 than they did in 2016.
The research firm estimates the average Canadian’s net worth rose by 8.5 per cent to almost $808,000 in 2017, but much of that wealth was tied up in assets that are difficult to cash in, such as real estate.
Meanwhile, debt climbed by 4.5 per cent in 2017 while the average interest-expense-to-income ratio rose 40 basis points to 6.4 per cent, the first increase in a decade.
Increasing debt levels coupled with rising interest rates meant the average Canadian household spent $544 more on interest charges last year.
Household debt has been identified as a key vulnerability for the financial system by the Bank of Canada, which has raised its key interest rate four times since mid-2017.
“For many Canadians the rising interest rates over the past year have already cost them the equivalent of an extra mortgage payment,” Peter Miron, Environics Analytics’ senior vice-president of research and development, said in a news release.
“As interest rates have steadily increased since late 2017 we expect the strain on household finances will be greater this year.”
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