Canadians’ appetite for consumer debt remains enormous, even after a global economic collapse that crippled national economies and households everywhere. According to a new report, Canadians’ debt levels have exceeded $1.5 trillion, and these levels are expected to climb substantially this holiday season.
The Equifax Canada report found that the third-quarter debt level is actually up 4.5 percent from $1.45 trillion in the second quarter, and up 7.4 percent from $1.41 trillion in the same quarter last year.
Ostensibly, the average non-mortgage debt held by Canadians increased 2.7 percent to $20,891. Although this is terrible news for consumers, the national credit monitoring agency did note that delinquency rates fell 1.10 percent from 1.11 percent in the second quarter. Delinquency rates track bills overdue by 90 days or more.
Biggest increases were located in automobile and installment loans, at 6.8 percent and 5.8 percent, respectively. Mortgage debt, meanwhile, stands at $985.1 billion.
“Following a frenzied start to the festive shopping season with more to come in the countdown to Christmas, we can expect the consumer debt to rise even further,” Equifax Canada senior director of decision insights Regina Malina said in a statement. “Tis’ the season, so we can anticipate credit cards getting a strong workout throughout December.”
The highest demand for credit can be found in the West since it has gone up six consecutive quarters. This area of Canada has been experiencing greater economic growth due to the oil boom so consumers are taking on higher debt levels – this is why Alberta remains one of the most indebted provinces in the country. The East, though, has been decreasing its hunger for credit.
Essentially, Canada owes $1.63 for every $1 it earned in the third quarter of this year.
Bank of Canada keeps interest rates low
On Wednesday, Bank of Canada Governor Stephen Poloz announced that the central bank would maintain its overnight interest rate at one percent, which didn’t surprise many economists.
In its announcement, Poloz noted that improvements in Canada’s economy have been threatened by falling oil prices and higher household debt.
Poloz alluded to the bank’s balancing of the risks for its decision to keep the rate unchanged, a rate that has remained the same since the fall of 2010. This historically low rate has assisted borrowers in taking on greater debt levels.
“While inflation is at a higher starting point relative to the October MPR, weaker oil prices pose an important downside risk to the inflation profile,” said Poloz in a statement. “This is tempered by a stronger U.S. economy, Canadian dollar depreciation, and recent federal fiscal measures. Household imbalances, meanwhile, present a significant risk to financial stability. Overall, the balance of risks remains within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent.”
Leave a Comment