The consumption of Canadian households is largely linked to two key points: credit cards issued by banks and the credit score attributed to each customer. The credit card, not to be confused with the debit card, which is only a payment card, allows, 1er of the month, to buy everything on credit.
Groceries, travel, swimming pools, furniture. At the end of the month, you refund your purchases, or defer payment for them, at an interest rate of 20%. Everything is done to encourage you to multiply these credits, because they will condition the "credit score" on which your bank will rely to grant you a mortgage.
And if you prove that you know how to be a good payer, a new credit facility is offered to you, because the loan will cover not only your loan for the house of your dreams, but also an additional "margin", in order to fill other desires. such as changing cars or investing in a pension fund for your future retirement. Easy access to credit that serves as an adjustment variable for all everyday expenses.
A heavy property debt
A study conducted in September 2019 by Desjardins Bank reveals that the indebtedness of Canadian households has just experienced a historic peak: the ratio of debt contracted by each household in proportion to its disposable income reaches 174%. An-Lap Vo-Dignard, first vice-president of National Bank Financial, nuances this figure: "The debt of Canadians is partly explained by the many credit tools available to them, but real estate debt is the one that weighs the most heavily on their debt, due to the rise in real estate, and what however, you should never forget that real estate is an asset. " As long as this sector holds up, the 63% of Canadian owners would therefore be safe.
But in the face of the collapsing economy linked to the Covid-19 crisis, not all Canadians have enough woolen socks to "See it coming". On March 25, a progressive research institute, the Canadian Center for Policy Alternatives, pointed out that almost half of tenants had less than a month of financial support ahead of them, a quarter having no more than a week of ahead of their expenses.
Prime Minister Justin Trudeau asked banks in late March to demonstrate "Flexibility Towards workers hit by the crisis. A half-heard appeal: the major banks have mostly offered a stay of payment for mortgage loans, but they are reluctant to lower interest rates on these credit cards which look like permanent consumer loans at prohibitive rates. Canadians are going to have no choice but to continue going into debt.
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