Inflation, debt and income
Inflation, debt and income all impact the family budget. The cost of living, based on a basket of 1953 goods (which is vastly divergent from what one might expect in 2018), increased by a mere 1.32% between 2016 and 2017. Over the same period the use of debt (credit) increased by nearly 5%. Incomes increased by about 1.8% between 2012 and 2016.
The picture that emerges is one of Canada slowly but steadily sinking into an economic depression spurred on by a combination of increased living costs, increasing taxes and decreasing incomes. As we can see incomes are far from keeping pace with inflation, and taxes chew bite even deeper into paycheques. Canadians, being as resourceful as they are, are resorting to the use of credit to maintain living standards.
Many Canadians are continuing to leverage the equity in the homes to stay afloat by consolidating higher interest credit cards and lines of credit into lower rate mortgages. Some lenders are revisiting the old “interest only” mortgage financing to stave off defaults and create interest opportunities for private investors.
Over the last ten years the stock market has returned an average of 8.8% per year, a marked improvement on the 100 year average of about 6% but a far cry from the 12% – 14% returns on private mortgage facilities.