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Now look at second column, which represents the entire group of 4.9 million Canadian home owning households with (any) mortgage debt. They actually happen to have a higher disposable income of $73,700 compared to those in the first column, perhaps because they are younger and/or still working. Interestingly, they don’t appear to spend any less percentage wise on transportation, food and recreation. Yes, they obviously spend much more on shelter, approximately 30% of disposable income because they do have a mortgage after all. But even those households with mortgages still manage to eke out a savings rate of 3.5% of disposable income. Not great, but positive and closer to the national average. (Math point to remember: X% of disposable income is less than X% of gross pre tax income.)

Now, if I didn’t know better than to be deceived by simple averages, I would (erroneously) conclude that Canadians would be OK. After all, even those with mortgage debt are still managing to sock away money for retirement and/or a rainy day. They are a prudent bunch.

But as we all know, you can drown in a pool with an average depth of a foot. Analogously, let’s take a close look at the Canadian families who live in the deep-end of the risk pool.

Now look at the third and final column in the table; the one I believe is the scary one. This summarizes the spending life of the 1.8 million Canadian households who have a mortgage liability ratio (MLR) larger than 20% of disposable income. Recall, this implies that they are spending at least 20% of their after-tax income to cover the mortgage (only). On a pre-tax basis this number is higher and this figure doesn’t include maintenance, property taxes, heating or utility bills and all the other things one needs to avoid freezing in the winter or melting in the summer. The 20% of disposable income (only) goes to keep the bank at bay.