Household debt to outpace income

When interest rates rise, 10 per cent of Canadian households could be in financial trouble, according to a TD Economics study.

TD chief economist Craig Alexander said household debt, which includes mortgages, has become excessive as Canadians get more accustomed to easy borrowing.

“One in 10 is a high ratio,” Alexander told CBC News. “It looks to us that Canadians’ personal finances have gotten stretched.”

Alexander also expects those debt levels to increase more rapidly than income growth.

The TD study said that even if the Bank of Canada’s overnight rate only rises to 3.5 per cent by 2013, family debt might still rise five per cent annually. That should be a concern, the report said, given its prediction that incomes will likely grow only by four per cent a year.