BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

June 06, 2012 06:00 ET

BMO Household Debt Report: Half of Canadians Expect to be Debt-Free by 2017

- While Canadians have taken on more debt in the past five years, the majority expect to pay it off in the same amount of time

- Report shows average household debt in Canada is $112,329

- 'Good debt' such as mortgages likely outweighing less favourable forms of borrowing

- Study shows differences between men and women

TORONTO, ONTARIO--(Marketwire - June 6, 2012) - BMO Bank of Montreal today released its first annual report on household debt in Canada, showing that the majority of Canadians with debt (54 per cent) expect to be debt-free within the next five years. The annual report is designed to measure the amount of debt Canadian households are carrying and how that debt is being managed.

Conducted by Leger Marketing, the findings revealed:

  • The average household debt load in Canada, including mortgage, credit card, line of credit and loan debt, is $112,329
  • One-quarter (26 per cent) of those who carry debt say that their debt load exceeds $100,000
  • While 25 per cent of Canadians are debt-free, 41 per cent say that they have taken on more debt in the past five years as a result of increased spending
  • The average monthly debt payment is $1,138.49

"While debt is a part of life for the majority of Canadians, it doesn't have to be a permanent fixture," said Su McVey, Vice President, BMO Bank of Montreal. "While interest rates have likely kept debt loads manageable for many households, that picture may be poised to change in the coming year. Developing a debt repayment plan that reduces debt but also accounts for other priorities and financial goals such as savings is essential."

The dangers of household debt have been repeatedly reinforced by the Bank of Canada and the Federal Government as levels have hit record highs. However, the latest numbers show that Canadian households seem to be getting the message.

"After the lengthy run-up of the past decade, it's encouraging that many Canadians are planning to rein in their debt, as interest rates won't stay low forever," said Sal Guatieri, Senior Economist, BMO Capital Markets. "Household credit growth has slowed to five per cent in April from a nine per cent clip over the past 10 years."

According to data from Statistics Canada, residential mortgages, typically considered 'good debt' as it is tied to household assets, accounts for 63 per cent of household liabilities, while consumer credit makes up approximately 28 per cent.

The report also showed that while most Canadians (70 per cent) say that they can afford to pay down their debt by paying more than minimum payments, one-third (30 per cent) appear to be treading water by paying only the minimum amounts.

Ms. McVey added that BMO offers a few tools and products Canadians can use to track their household finances and save. For example, BMO MoneyLogic allows Canadians to track and review their spending limits and savings goals in real time. "Once you have a clear idea of where your money is going, it makes it easier to course-correct where you may be over-extending and put a savings plan in place."

Ms. McVey noted that high-interest savings accounts, such as the BMO SmartSaver Account, are an excellent option for Canadians looking to begin saving for long-term goals, or simply to put a 'rainy day' fund in place to prepare for the unexpected.

Canadian Debt Picture by Province
Debt in
$112,329 $157,784 $144,178 $116,019 $109,279 $85,903 $92,231
Debt-free by 2013 17 per cent 28 per cent 19 per cent 13 per cent 14 per cent 17 per cent 13 per cent
Debt-free by 2017 37 per cent 32 per cent 33 per cent 30 per cent 37 per cent 43 per cent 31 per cent

Demographically, the report revealed:

  • Men are particularly likely to carry large amounts of debt, with 30 per cent indicating that they owe more than $100,000 compared to 22 per cent of women
  • Those between the ages of 35 and 44 also tend to be the most heavily burdened with debt, with 43 per cent saying they carry more than $100,000 in debt
  • Men are particularly optimistic about their ability to pay down debt, with 20 per cent saying that they will do so in the next year compared to 14 per cent of women

The BMO Household Debt Report was conducted by Leger Marketing and compiled via on-line survey questions from April 2nd, 2012 to April 5th, 2012 using Leger Marketing's online panel, LegerWeb, with a sample of 1507 Canadians. A probability sample of the same size would yield a margin of error of ± 2.5 per cent, 19 times out of 20.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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