Household debt in Canada becoming a 'serious issue'

Canadian household debt is reaching a critical level, according to a report released this week by Canada Mortgage and Housing Corporation, adding that the situation may require closer monitoring by authorities. Mortgage debt currently accounts for more than two thirds (68 percent) of household debt in Canada, while personal lines of credit have grown at a faster rate than any other sub-component of household debt. "It is important that consumers and stakeholders continue to be vigilant in monitoring both the magnitude as well as the composition of household debt and take appropriate action," CMHC said, according to Dow Jones Newswires. A double-dip recession and a plague of unemployment would be disastrous, the report noted. Europe's mounting debt crisis only complicates the situation and highlights the need for lenders to invest in consumer credit risk management. However, the report acknowledged, "most Canadian households have the capacity to deal with adverse economic conditions, due to the high quality of mortgage credit in [the country]." Homeowners' substantial equity position and their ability to adapt their discretionary spending will also ease financial burdens.