VANCOUVER - Canada has so far avoided being sideswiped by the so-called U.S. credit crunch with British Columbia the farthest away from the potential damage, according to a report from CIBC World Markets.
"Despite the doom and gloom we are witnessing and reading about on a daily basis coming from the U.S. economy, especially when it comes to consumer markets, Canadian households have not noticed [a decline in available credit]," CIBC senior economist Benjamin Tal said in an interview.
And within Canada's economic divide, Tal added, the credit picture "is much better in B.C.," where the commodities-rich economy is performing better than Ontario and Quebec.
British Columbians do have the highest debt-to-income levels in the country, given B.C.'s expensive real estate, and incomes that are not significantly higher than other provinces such as Ontario or Alberta.
"By definition the average mortgage is much larger in B.C. [than the rest of Canada]," Tal added.
However, CIBC's assessment is that so far, British Columbians are coping with their big mortgages. B.C. recorded the lowest rate of mortgages that have fallen into arrears among all provinces.
In B.C., fewer than 0.15 per cent of mortgages have fallen behind on payments compared with the national average of 0.25 per cent.
The CIBC report, an analysis of household credit, found that Canada's markets are still strong with growth in both the home-loan and general credit segments, although Canadians are adding debt faster than incomes are growing.
Canada's overall debt rose by three per cent in the fourth-quarter of 2007 while disposable income rose only 1.6 per cent, the CIBC report said.
CIBC found that overall, Canadians' outstanding mortgage debt grew by 13 per cent in 2007. And while the bank expects that rate to slow in 2008, "the level of activity is still very strong" so far this year.
Regionally, CIBC said the growth in mortgage debt was highest in the western provinces, which "reflects the growing economic performance gap between the west and the rest of the country."
Tal added that Canada will be affected by the faltering U.S. economy, which will be seen in slower growth in mortgage markets. In B.C., he added, markets will slow because housing is increasingly becoming unaffordable.
"Affordability is starting to become a major issue," Tal said. "So expect housing starts and resale activity to soften and overall credit activity to slow from double-digit [growth] to six to seven per cent."
Nationally, CIBC found that the number of consumer bankruptcies rose one per cent in the 12 months prior to Jan. 31, and it expects the number to rise four-to-five per cent in 2008.
By Derrick Penner, Vancouver Sun © Vancouver Sun