Thirty-Something Canadians Most Indebted After Home Boom

Canadians from 35 to 44 years old added the most relative to other age groups to their debt loads as rising home prices led them to take out larger mortgages, according to a report by Royal Bank of Canada.

People in that age bracket had liabilities equal to 49 percent of their net worth in 2012, up from 31 percent for the same group in 1999, the report by Royal Bank economists Paul Ferley and Nathan Janzen said. The figures compare with 9 percent and 12 percent for people aged 55 to 64.

First-time homebuyers through this period may have needed to borrow more as prices rose by an average of 4.6 percent a year, said Ferley and Janzen. The higher debt increases the risks from a spike in interest rates or a drop in household income, the report said.

“The 35-44 age category is particularly vulnerable relative to the rest of the population were an unforeseen shock to occur,” the economists wrote in the report.

“This group contained a disproportionate share of first-time homebuyers,” they wrote, “and the 1999 to 2012 period also coincided with historically high rates of house price appreciation.”

Royal Bank economists predict the housing market is headed for a “soft landing” that will prevent a major credit squeeze, a view shared by Bank of Canada Governor Stephen Poloz, although he has warned a housing bubble remains the biggest risk to the domestic financial system.

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