Posthaste: Millennials, the most indebted Canadians, face the biggest pain if economy sours
Good morning,
Canadians have been feeling the strain of higher interest rates and inflation across the nation but as a recent report from RBC points out, some more than others.
Older millennials and younger members of Generation X, who have seen their debts swell to record levels in recent years, are most vulnerable to job losses, writes RBC economist Carrie Freestone.
Indebted Canadians between the ages of 35 and 44 had a debt-to-disposable-income ratio of 250 per cent in 2019, much heavier than the debt load they carried a decade before when it was 150 per cent, she said.
That translates into $2.50 in debt for every dollar of disposable income. And it’s a lot even by Canadian standards, which at last count had the highest household debt in the G7. The national debt-to-disposable-income ratio in the first quarter of this year was 184.5 per cent.
Younger millennials, under 35 years old, aren’t much better off with debt loads of 165 per cent of their disposable income.
“The millennial generation has in many ways been defined by its staggering high household debt,” said Freestone.
The pressure, unfortunately, is only going to get worse. The Bank of Canada has raised its interest rates from 0.25 per cent to the 22-year high of 5 per cent and may not be finished yet. Canadians with mortgages coming up for renewal in the near future could see their monthly payments rise by 25 per cent, she said.
A poll done by Angus Reid after the Bank last raised rates in July found more than a third of the people polled who had a mortgage said they were having trouble making payments.
Almost 60 per cent expected the rate increase to have a negative impact on their finances and a third were bracing for “significant” challenges.
A big
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