JASON HEATH | Special to the Financial Post | Published April 13, 2012
When used responsibly, home equity lines of credit can help facilitate investments, improve tax-efficiency and provide liquidity. But when credit lines are used for household appliances, vacations, new cars and dinners on the town, the advantages quickly disappear.
A report issued by consumer credit agency Equifax Canada this week suggested Canadian line of credit debt rose by 1.4% in the first quarter — and has increased in each of the last 4 years.
Equifax suggested that even though credit card debt fell marginally, it was largely due to people dumping that debt onto their lines of credit.
It could be argued that the U.S. sub-prime mortgage crisis of 2008 was actually a home equity line of credit crisis for prime and sub-prime borrowers alike.
And despite repeated warnings by Bank of Canada Governor Mark Carney that Canadian household debt is the top risk to our economic recovery, we seem destined to follow in the footsteps of our neighbours to the south. read full article