Personal Investor: Most Canadians don’t understand HELOCs

Dated: January 18 2019

Views: 58

Jan 16, 2019

Personal Investor: Most Canadians don’t understand HELOCs

 

Personal Investor: Most Canadians don't understand HELOCs

Columnist image
Dale Jackson

Your Personal Investor

|Archive

Most respondents to a new survey from the Financial Consumer Agency of Canada scored less than 50 per cent on their knowledge of home equity lines of credit (HELOCs).

That’s alarming, considering HELOCs have become a way of life for young Canadian households looking for easy, relatively cheap money. According to the federal financial consumer watchdog, Canadian HELOCs currently carry an average balance of $65,000.

The agency also said over the past 15 years, HELOCs have become the largest contributor to growth of non-mortgage household debt in Canada – more than doubling credit cards or auto loans.

Most HELOCs are used to borrow for home renovations, debt consolidation, vehicle purchases and daily expenses, according to the survey.   

A generation ago, the very idea of leveraging the roof over your head for cash suggested financial dire straits. Yet, dire straits seem to be where many homeowners with HELOCs are heading. The same survey found 19 per cent of Canadians borrowed more than originally intended, and 25 per cent only paid back the interest on the loan while the principal grew. It also found those aged 25 to 34 were most likely to struggle if their payments were to increase by $100 a month.  

Interest rates on HELOCs are generally tied to the prime lending rate of the major banks since the house is used as collateral. According to the consumer agency, debt accumulation and rising borrowing rates could put many Canadian households at risk of default and could have a negative impact on the entire housing sector.

Blog author image

Steven Axford

Steve Axford grew up in Victoria, BC and has always been active in his community. Steve is a Victoria Cougars Hockey Team alumni as well as a Victoria Shamrocks (intermediate) alumni. During his time....

Latest Blog Posts

Experts Say Home Prices Will Continue to Appreciate!!

It’s clear that consumers are concerned about how quickly home values are rising. Many people fear the speed of appreciation may lead to a crash in prices later this year. In fact, Google 

Read More

3 Graphs Showing Why You Should Sell Your House Today

There’s no doubt that 2021 is the year of the seller when it comes to the housing market. If you’re a homeowner thinking of moving to better suit your changing needs, now is

Read More

Big Incentives for Homeowners to Sell Now!

4 Big Incentives for Homeowners to Sell Now1.4KSHARES1.1K12913159The housing market keeps sailing along. The only headwind that could take it off course is the lack of inventory for sale. The 

Read More

Housing in Greater Victoria remains in high demand

 "Comparing last year’s April market to 2021 does not provide us any real insight into long term market trends,” said Victoria Real Estate Board President David Langlois. &ldquo

Read More