Canadian homeowners erase debt

It seems Governor Mark Carney’s repeated warnings on debt have finally hit home.

Though Carney’s leaving us, he’s likely happy to see Canadians are now focused on reducing their household debts, finds a Manulife Bank of Canada Survey.

It says 55% of homeowners now have less debt than they did 12 months ago. That’s an improvement over this past August when only half of Canadians reported year-over-year debt reduction.

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Further, only one-in-five homeowners say they have more debt than they did in 2012. On the flip side, 9% of respondents say they’ve erased their amounts owing over the past 12 months.

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“Effective debt management should be a core component of every financial plan,” says Doug Conick, president and CEO of Manulife Bank of Canada. “Whether you’re starting out in life and trying to manage the amount of interest you’re paying, or approaching retirement, ensure you’re debt-free.”

Alberta homeowners reported the most success, with six-in-ten servicing their debts. Just under half (49%) of those polled in Quebec had the same result.

Still, most Canadian homeowners (60%) aren’t confident they’ll be free of debt free when they reach retirement. Those who receive professional advice say they’re more positive they’ll reach their long-term goals.

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The survey finds people who do still have debt will either continue to work until their debt is gone (47%), or still retire despite their amounts owing (45%).

Either way, they have to consider that “eliminating debt is just as important as creating an income stream, because they’re two sides of the same coin,” says Conick.

“If you have debt in retirement, your principal and interest payments will generally come from the same pool of assets.”

Read: Canadians struggle to be mortgage-free

During retirement, nearly half of homeowners (46%) indicate they’ll stay in their current home, while a third (33%) plan move to a different residence.

One-in-five haven’t yet made the decision. However, about 13% of homeowners plan to access the equity in their homes to supplement their retirement incomes, with approximately 4% intending to borrow against their home equities while 9% will downsize and use the excess funds.

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