Yukonomist: The changing Yukon debt landscape


Sometimes you hear people say that the Yukon is a great place to reconnect with nature and what’s important in life, and get away from the frenzy of modern consumerism.

That’s not what the debt markets think of us. The average Yukoner aged 18 or over paid $3,039 in interest in 2019, not too far below the national average of $3,376. And our debt payments have been growing slightly faster over the last five years.

We’re often keen to tell our neighbours about our new mountain bike, kitchen renovation or boat. But you don’t often hear people sharing their debt-service ratios at backyard barbecues.

Traditionally, we’ve been conflicted about debt. Accountants will counsel caution. Grandparents, remembering hard times, may advise the kids to avoid it. English majors may quote Polonius advising his son in Hamlet before a big trip to Paris: “Neither a borrower nor a lender be.”

On the other hand, advertising relentlessly pushes us to borrow and spend. One of the many perils of social media is being bombarded with images of friends doing fun things with expensive toys.

But now, COVID-19 has upset whatever delicate balance we had found between prudence and profligacy. Debt is just so darn cheap as central banks pump money into the economy.

The Bank of Canada’s bank rate is just half a percentage point. Younger Yukoners may not realize how low that is. The Bank Rate was 4.75 percent just before the global financial crisis and hit a punishing 21.03 percent during the 1981 recession that crushed the Yukon economy.

The bank doesn’t expect to be in a position to raise rates until sometime in 2023.

The federal government can borrow money for ten years at just one per cent. You can get a deal almost as good. One bank on Main Street is offering mortgages at just 1.75 per cent (five-year variable closed).

A $300,000 mortgage at this rate results in a monthly payment of $1,234. If you were paying around seven per cent like people were before the global financial crisis, the monthly payment would be $2,101. If the rate was 21 percent, like some Yukoners in 1981 were paying, it would be $5,086.

Money is cheap for households, businesses and governments. It makes sense to rethink your approach to debt.

There is, however, a “but.” The economic weather forecast for debt may be unusually sunny, but the laws of economic gravity have not been repealed.

Debt is a useful tool, like electricity or gasoline. Used carefully, you get bright lights and fast cars. Used carelessly, you get zapped or incinerated.

So, yes, your household probably can afford a more expensive house than a few years ago. But you have to ask yourself some questions. Do you really need that extra bedroom or bigger garage? What is the risk of getting laid off or your employer going bankrupt and, if it happens, how long can you keep paying the mortgage?

Your bank will be stress-testing your ability to pay the mortgage if rates go up. But you should do the same. And given how uncertain the economic outlook is, it’s worth considering whether you should lock in current low rates for five years even if it is more expensive.

Like flying in a floatplane, it’s also smart to know where the escape hatch is. If house prices keep going up, then if you get over-extended you can always sell your house and move back into something smaller. Given the prices for used snowmobiles on Kijiji, you might even make a few bucks selling your toys. But in the unlikely event of some spike in interest rates, what if house prices actually go down?

This brings up boring old concepts such as large down payments and rainy day cash reserve funds.

For business, the questions are even more complicated. You may have debt accumulated during the pandemic. Refinancing at lower rates, if you can, is a good idea. Corporate Canada issued bonds at an unprecedented rate in 2020, doing just this.

Depending on your line of business, this may be an unprecedented opportunity to invest in new assets and equipment. Some industries are booming despite or even because of the pandemic, while others are looking forward to a post-vaccine boom in demand. Companies of all sizes around the world are investing in new digital technologies, labour-saving automation and internal systems to be more competitive.

Governments have also been throwing old fiscal rule books out the window. If the current Yukon government chooses to call an election this spring, I expect all the parties to be campaigning on ways to borrow to pre-spend future transfer payments. The 2017 Yukon Financial Advisory Panel report is now like a mildly embarrassing family photo relegated to a spot on the basement wall.

Cheap debt presents all of us with lots of opportunities. But before signing on the dotted line, it’s worth thinking twice. You might even want to talk to a Yukoner who had to pay the mortgage in 1981.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. He is a Ma Murray award-winner for best columnist and received the bronze for Outstanding Columnist in the 2019 Canadian Community Newspaper Awards.


Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Fines for contravening the fire ban start at $1,150 and could go as high as $100,000. File photo
Yukon campgrounds will open on May 1 this year. (Black Press file)
Yukon campgrounds to open early

Yukon campgrounds will open on May 1 this year. The early opening… Continue reading

Yukonomist Keith Halliday
Yukonomist: The aesthetics and economics of highway strips

One of the many cultural experiences you enjoy while driving from Whitehorse… Continue reading

Artwork by Grade 2 student Faith showing her thanks for everyone.
Artwork by Grade 2 student Faith showing her thanks for everyone. (Submitted)
Yukon kids express gratitude for nature, pets and friends in art campaign

More than 50 children submitted artwork featuring things they are grateful for

Team Yukon skip Laura Eby, left, directs her team as Team Northern Ontario skip Krysta Burns looks on at the Scotties Tournament of Hearts in Calgary on Feb. 22. (Jeff McIntosh/CP)
Team Yukon reports positive experience at Scotties

Team Yukon played their final game at the national championship in Calgary on Thursday afternoon

A sign indicating a drop-off area behind Selkirk Elementary school in Whitehorse on Feb. 25. (Haley Ritchie/Yukon News)
Parking lot proposal for Selkirk Elementary criticized

Parents and school council are raising concerns about green space and traffic woes

Tom Ullyett, pictured, is the first Yukoner to receive the Louis St-Laurent Award of Excellence from the Canadian Bar Association for his work as a community builder and mentor in the territory. (Gabrielle Plonka/Yukon News)
Tom Ullyett wins lifetime achievement award from the Canadian Bar Association

Ullyett has worked in the Yukon’s justice ecosystem for 36 years as a public sector lawyer and mentor

The Blood Ties outreach van will now run seven nights a week, thanks to a boost in government funding. Logan Godin, coordinator, and Jesse Whelen, harm reduction counsellor, are seen here on May 12, 2020. (Crystal Schick/Yukon News file)
Blood Ties outreach van running seven nights a week with funding boost

The Yukon government is ramping up overdose response, considering safe supply plan

Ranj Pillai speaks to media about business relief programs in Whitehorse on April 1, 2020. The Yukon government announced Feb.25 that it will extend business support programs until September. (Crystal Schick/Yukon News)
Government extends business relief programs to September, launches new loan

“It really gives folks some help with supporting their business with cash flow.”

Whitehorse City Hall. (Joel Krahn/Yukon News file)
A look at decisions made by Whitehorse City Council this week

Bylaw amendment Whitehorse city council is moving closer with changes to a… Continue reading

Susie Rogan is a veteran musher with 14 years of racing experience and Yukon Journey organizer. (Yukon Journey Facebook)
Yukon Journey mushers begin 255-mile race

Eleven mushers are participating in the race from Pelly Crossing to Whitehorse

Legislative assembly on the last day of the fall sitting in Whitehorse on Nov. 22, 2018. As the legislature prepares to return on March 4, the three parties are continuing to finalize candidates in the territory’s 19 ridings. (Crystal Schick/Yukon News file)
Nine new candidates confirmed in Yukon ridings

It has been a busy two weeks as the parties try to firm up candidates

David Malcolm, 40, has been charged with assaulting and attempting to disarm a police officer after an incident in Whitehorse on Feb. 18. (Phil McLachlan/Capital News)
Man resists arrest, assaults officer

A Whitehorse man has been charged with assaulting and attempting to disarm… Continue reading

Yukon Energy in Whitehorse on Aug. 4, 2020. A site on Robert Service Way near the Alaska Highway has been selected as the future home of Yukon Energy’s energy storage project. (Crystal Schick/Yukon News file)
Site selected for Yukon Energy battery project

Planned to be in service by the end of 2022

Most Read