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By: Rolf Li

There is one problem concerning economists and politicians alike: Canada has too much debt that no one is paying off on a regular basis. Once regarded as a minor issue and a easy fix problem, the debt level in this country is much too high to be dealt with lightly. Alarm bells are ringing the ears of many as banks start to warn borrowers that their payments are due. With the track that we are headed on right now, Canada might face a situation close to the American housing collapse in 2008 (which was primarily due to mortgage debt.)

$1.81 trillion CAN is the number that you are looking for. $1.81 trillion is the burden we carry when we walk around, try to enjoy our lives, and plan for retirement. So now we have to ask ourselves, “How did this happen?”. What caused the housing market to skyrocket and induce more debt into our lives? Statistically speaking, mortgages accounted for more than 7% of our entire GDP. 7%? This is the sign that Canada’s housing market is getting way out of control. By comparison, only 3.5% of the USA’s GDP has gone towards mortgages and houses. In fact, the world bank encourages data around the 3-5%. So how did we get into this mess of huge debt on houses? For starters, there is a aging baby boomer population that is about to retire, setting the balance of workers and retirees into oblivion. Now days, there are young couples who are around age 30, taking on mortgages of $1 million, when their average net income is around $150,000. With interest rates so low, the banks are encouraging buying houses as a form of investment, but here is the problem. It is not an investment to most families. The constant mortgages that are hitting people are forcing them to move and sell inside of the bubble. There is no safety from the burst. As soon as the banks realize that the market is out of control, there will be a hike in interest rates and people will end up homeless. With borrowing so easy, many will turn to the banks right now and say “I want to borrow $1 million.” It is true that low interest rates stimulate the economy, but when the rates increase, people who have a lot of debt and was handling it pretty well are now biting more than they can chew. Cheap credit is ruining our futures and the housing market seems to be the root of the problem. With debt to income at 165%, it is unacceptable to ignore the problem of housing and we should recognize the ways to fix the problem.  The days of cheap credit will come to an end, and the housing market will change, so before it is too late, protect yourself and your family, don’t make bad debt choices.

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