Canadians Are Carrying Less Mortgage Debt

There has been a lot of concern lately about the amount of debt that Canadians have been accumulating. Many people have been stretching their limits to get a bigger home, a better car and faraway vacations. According to a new report that has been released by Royal Bank, however, Canadians are now taking on less debt overall.

In May, the overall debt accumulation growth per household in Canada remained at 4.2%. This was approximately the same level as the 3 previous months. Outstanding debts for mortgages were at $1.23 trillion with the annualized growth slowing down a bit from 5.1% in April to 5% in May.

Borrowing for other items other than mortgages increased from 2% in April to 2.2% in May. Borrowing for business purposes also became stronger during the month of May. Short-term business debt increased from 9.6% in April to 10.6% in May.

The Royal Bank of Canada says that this is generally good news. The Bank of Canada has previously stated that household debt is the biggest risk to Canada's economy and financial system. As the housing market continues to moderate, there will be less risk posed since fewer households will be carrying too much debt. It also means that the Bank of Canada may decide to increase interest rates by the middle of 2015.

It's always difficult to predict when interest rates are going to rise. We have become used to the low rates and have almost begun to take them for granted. It's a sure thing that interest rates will rise - we just don't really know when. If you have been thinking about purchasing a new home, it's best to do it sooner than later. The lower rates can save you thousands of dollars in interest costs over the term of the mortgage.