Rising household debt could be drag on long-term growth: federal document + MORE Aug 26th

Soaring home prices have been a boon to mortgage businesses, but recent government efforts to cool the housing market could impact lenders if the economy falters, CIBC said Thursday.
While Canada’s economy is pumping out jobs and growing at a steady pace, a potential shock could put borrowers at risk of foreclosure _ particularly those who have overextended themselves to buy homes, said the bank’s chief risk officer.
“If house prices do come off, we need our borrowers to continue to have their jobs to service their loans,” Laura Dottori-Attanasio told analysts during the bank’s third-quarter conference call.
“But in the event we find ourselves taking on assets, we do have _ and continue to have _ a good buffer as it relates to that loan-to-value.”
CIBC reassured analysts that its loan book, which sits at $197 billion, won’t turn into a problem. The bank took on $16 billion of new mortgages in the quarter, an increase of eight per cent over the same time last year, with more than half in Toronto and Vancouver’s overvalued markets…

Even debt-free Canadians could eventually feel a pinch from someone else’s maxed-out credit cards, suggests research presented to senior officials at Canada Mortgage and Housing Corp.

Q. I purchased a condo in Saskatchewan in 2001. I was young, and because I had a lower income than usual that year, my father co-signed for the mortgage. If I sell the condo with my dad on the title, will he be subject to the capital gains tax? And if so, can I get him off the title prior to a potential sale and avoid any capital gains tax?
—Kurt
A: The entire concept of ownership in the Income Tax Act is intriguing, as there is no clear definition of the term. For tax purposes, however, capital gains are reported on the tax return of the beneficial owner of the property—the person who has legal ownership and enjoyment of the property as well as the legal title.
In Interpretation Bulletin 170R, the CRA describes beneficial ownership as having possession, use and risk as its primary attributes. Taking responsibility for insurance coverage, interest costs and entitlement to any income from the property all are considered indicators of ownership.
Resulting income taxes, therefore, are paid by that beneficial owner…

Even debt-free Canadians could eventually feel a pinch from someone else’s maxed-out credit cards, suggests research presented to senior officials at the federal housing agency.
Canada Mortgage and Housing Corp. board members received an update in March on the country’s credit and housing trends. The presentation contained a warning: the steady climb of the household debt-to-GDP level had put Canada’s long-term economic growth prospects at risk.
The document pointed to a study that argued household debt accumulation eventually hampers economic growth over the longer term, eclipsing the nearer-term benefits of consumption. The strong expansion of household spending, encouraged by a prolonged period of historically low borrowing rates, has created concerns over Canadians’ record-high debt loads. It has also been a major driver of economic growth.
The Canadian Press obtained a copy of the CMHC presentation via the Access to Information Act. It was included in a “confidential” memo to deputy finance minister Paul Rochon…