Business Blog

By Leah Walker — Temptation is headline news lately. Even our central bank is buzzing about it, warning of the danger of taking on monstrous debt, due to enticingly low interest rates.

In its semi-annual report, the Bank of Canada says while Canadian household debt as a share of personal disposable income may be lower than in the United States and the United Kingdom, “its upward trend implies that households have a growing vulnerability to additional adverse shocks.” In other words, we could get swamped by the additional debt we’ve taken on when interest rates eventually go up.

The debtload is most evident in the housing market, where the average price of a home is up 21 per cent from a year ago and sales volumes are up 41 per cent.

On a lesser scale, my financial restraint has been tested by the temptation to take on beautification projects around the home, the rationale being a tax refund in the spring. The government’s intention with the Home Renovation Tax Credit has been to spur consumer spending to warm up a chilly economy, and I’ve certainly been doing my part. Encouragingly, though, it appears only a minority of us have dipped into the line of credit or credit cards to fund the work.

A survey this fall by RBC finds a majority of Canadian renovators plan to take advantage of the tax credit this year and close to half have done more renovations because of the tax break. The survey also found that three in four Canadians who are planning to renovate will pay for most or all of it with cash or savings, compared with 70 per cent in 2008. Only 24 per cent of renovators, plan to use a credit card to finance their renovation this year, compared with 32 per cent in 2008.

Around here, the kids’ education fund may be in need of some sprucing up, but gee, the kitchen looks great!