Only a Bank of Canada with a sadistic bent would be contemplating raising rates anytime on the horizon
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Well, Canada’s nice run of positive economic data — taking the loonie to almost 71.8 cents U.S., testing the 100-day trendline — just came to a thundering halt. The loonie seems oblivious to Donald Trump getting set to hit many Canadian goods with a 50 per cent broad-based tariff on Aug. 19.
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Even with the recent glow from the employment numbers, 37,523 Canadian consumers filed for insolvency in the second quarter, up nearly seven per cent from a year ago and the highest for any quarter since the tail end of the Great Recession in 2009. Bankruptcy filings in each of the past two quarters topped 2009 levels. These are filings, but the actual tally of personal bankruptcies totalled 8,600 in the second quarter, up 10.3 per cent year over year.
It isn’t just credit cards. Homeowners saw their insolvencies climb five per cent as well and now represent nearly one in 10 of all such distressed debtors, a sign of the vagaries of entering into a negative net equity position in this multi-year era of residential real estate deflation benchmarked against sky-high loan-to-value mortgages at the time of origination.
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Meanwhile, the share of residential mortgages now in arrears has risen in the past year to a decade-high and is a bit above the first quarter 2008 level that preceded the Great Recession — 40,912 mortgages now having this dubious status versus 33,393 a year ago.
Perhaps the most startling statistic of all, pointing to a grim reality even with home prices having come off the bubbly boil and now down 20 per cent from the cycle peak, the median loan-to-income (LTI) ratio for first-time home buyers finished 2025 at a nosebleed high of 372 per cent.
More than one in five are burdened with an LTI ratio of 450 per cent, which is beyond the pale. A whole generation of 20- and 30-somethings can be expected to not be partaking in any economic activity for many years to come. That should be a message to the cheerleading Bay Street economics crowd.