Sep 13, 2010, Mortgage arrears soar in Alberta; consumers live cheque-to-cheque

The number of Albertans behind on their mortgages has risen dramatically in the past three years with the province sporting by far the highest rate in the country.

According to data as of June by the Canadian Bankers Association, there were a total of 500,429 mortgages in Alberta, through banks belonging to the association, and 3,707 of those, or 0.74 per cent, were considered to be in arrears of three or more months.

In June 2007, only 0.14 per cent (659) of a total of 458,044 were in arrears.

By contrast, the CBA data shows that across the country 0.42 per cent, or 17,090, of mortgages were in arrears of a total of just over four million in June of this year.

Meanwhile, a major national survey of working Canadians, released today, shows that employees continue to live paycheque to paycheque. They are concerned about how interest rates and the economy will affect their personal finances and retirement.

The 2nd annual National Payroll Week Employee Survey, conducted by the Canadian Payroll Association, found that 59 per cent say they would be in financial difficulty if their paycheque was delayed by a week.

“The most significant result of Canadians continuing to live paycheque to paycheque is its impact on their concerns about personal finances and retirement,” said Cindy Forget chairman of the CPA, in a news release.

By age group, the younger workforce is having the greatest trouble meeting their current expenses, with 65 per cent of those aged 18-34 saying it would be very difficult, difficult or somewhat difficult for them to meet their current financial obligations if they missed even one paycheque.

Also today, an economic report by OECD said record-high house prices in Canada and household indebtedness pose downside risks to the country’s outlook.

“Household debt as a proportion of GDP has risen significantly in Canada over the last decade,” said the report. “The household debt-to-income and debt-to-assets ratio remain at or near historical highs. Most of the increase in household credit has been in mortgage debt, helping to bring about a strong revival in housing-market activity after a brief dip at the beginning of the (economic) crisis.

“High household indebtedness also implies a growing vulnerability to any future adverse shocks. In any case, household credit growth needs to slow down, which may well moderate private spending and residential investment in the coming quarters.”

And on Monday, Statistics Canada said household net worth fell 0.6 per cent (or $34 billion) to $5.9 trillion in the second quarter, the first decline since the first quarter of 2009, largely reflecting the decline in North American stock markets.

Liabilities of households increased, led by mortgages and consumer credit. The ratio of household credit market debt-to-personal disposable income declined to 143.7 per cent, its first decrease since the first quarter of 2006.

Household credit market debt-to-net worth increased after four consecutive declines. Households owner equity as a percentage of real estate assets edged down to its lowest level since the first quarter of 2002, after remaining relatively stable over the previous two quarters, said Statistics Canada.

“We anticipate that debt will continue to constrain household net worth growth in the coming quarters and the measures of indebtedness such as the debt-to-income, debt-to-assets and debt-to-net worth will likely continue to deteriorate in the coming months,” said Diana Petramala, economist with TD Bank Financial Group, in a research note.

By Mario Toneguzzi, Calgary Herald