Canadians face debt warnings, but CIBC poll finds little worry

There seems to be a disconnect between financial experts who are worried about Canadian debt levels and the people who actually hold the debt.

On Wednesday, Bank of Canada governor warned consumers on high debt loads, including auto loans, while ratings agency Fitch warned at the beginning of the week that household debt was a risk for Canadian banks.

• Stephen Poloz says up to 30% overvalued housing big risk to economy
• Canadians' debt levels 'unsustainable' Fitch warns

But a CIBC poll out today found most respondents are not worried about their level of personal debt.

About 24 per cent said they had no debt at all and another 24 per cent say they carry a comfortable level of household debt. Only 16 per cent were worried about their debts.

The online survey was conducted by Angus Reid Forum for CIBC among 1,509 randomly selected Canadian adults in a sample chosen to represent the Canadian population. The survey was conducted Sept. 29 to 30.

The survey found most respondents were taking steps to reduce their debt levels, with 34 per cent say they are working hard to pay off their debt as quickly as possible and 51 per cent saying they are making a “reasonable effort” to pay off their debt.

The survey seems to reinforce the findings of a recent CIBC economic report that found Canadians had paid off $11 billion in mortgage debt in the last four years.

With interest rates low, homeowners have taken the opportunity to pay off principle and shorten their amortization periods, the study found. Almost half of mortgage holders had made accelerated payments.

“Annual research on financial priorities for Canadians shows that debt repayment has been their number one priority for four years running, and we are now seeing some results from those good intentions,” says Christina Kramer, CIBC's executive vice president of retail and business banking.

Among respondents to the CIBC survey with debt, 71 per cent think they will have their debt paid off in less than five years and 35 per cent plan to pay off their debt in less than two years.

Yet there are signs that consumer debt may not be as controllable as some may believe. Last week Equifax found Canadians now owe $1.5 trillion, up 7.4 per cent from a year ago.

Ratings agency Fitch called Canadian levels of consumer debt, especially mortgage debt caused by high housing prices,  “unsustainable.”

And Poloz called high debt levels a risk to the Canadian economy, saying 12 per cent of households are extremely indebted, which means they have a debt-to-income ratio of at least 250 per cent.  Much of that heavy debt is related to high housing costs.