Retired Canadians are finally enjoying the fruits of their labours. Or are they? According to statistics, people over 65 are piling on debt just as other age groups are paying it down. And one contributing factor may be the number of seniors gifting or loaning down payments to their children.
A report by rating agency Equifax Canada Inc. noted that average consumer debt for the 65+ group increased by 6.5 percent in 2013, ahead of all other age groups.
In a Financial Post article, Nadim Abdo, vice-president of consulting and analytical services at Equifax, says: “I think what’s happening is people 65-plus are taking this on mostly to help their kids.”
Experts suggest it’s partly thanks to low interest rates; with home equity loans at record lows, seniors are taking advantage and their kids are benefitting.
It’s understandable, as Jim Yih points out in the Edmonton Journal: “With high real estate prices and tighter mortgage lending rules, it can be tough for first-time homebuyers to get into the market. Many new homebuyers look to parents for help, and many boomers and soon-to-be retirees are quick to help out by offering the down payment.”
Unfortunately, if parents need to tap their investment in an emergency, they can’t “just pull the money out of the home as they would with an investment like a mutual fund,” says the Parental Guide: Buying a Home for Your Child. So they go further into debt…and become statistics.
Likely not what their debt-conscious children had in mind.