Consumer debt in Canada reaching boiling point
Despite warnings from financial leaders and an increasingly unstable global economy, Canadians consumer debt load is hitting an eight year high.
A new report released by TransUnion showed the average Canadian’s total non-mortgage debt to be $26,221 per person – the highest level since credit bureaus first started tracking debt levels.
While this is only an increase of $192 over the previous quarter, it is the second quarter in a row that has seen debt levels rise, along with a year over year increase.
In a statement released to the press, Thomas Higgins, TransUnion’s vice president of analytics and decision services had this to say about the findings:
“We are in a unique situation because while it is somewhat disconcerting to see average consumer total debt reach its highest level since we’ve been tracking this variable, Canadian consumers appear to be able to manage this debt as delinquency levels have dropped across all of the major credit vehicles. It’s quite possible that this is a trend that will continue as consumers take advantage of the low interest environment.”
This finding comes after Bank of Canada Governor Mark Carney and other policy makers have repeatedly warned Canadians that record levels of household debt put the economy at risk. The smallest rise in Canada’s currently very low interest rates or unemployment could see many people struggling to make their payments.
Finance Minister Jim Flaherty agreed with the Governor, publicly urging Canadians to be more responsible with taking on debt and even making it harder for the average citizen to get a mortgage.
Debt counselling service Consolidated Credit Counseling Services of Canada, Inc was surprised with the findings.
“We did a poll a while ago and we’ve been hearing that people are paying down their debt. That it’s a priority for them. We’re kind of surprised to see that’s not actually the case,” Jeffrey Schwartz, head of Consolidated Credit Counseling Services of Canada, Inc. told The Star. “I understand the reasons for it. But it’s still disappointing.”
On a positive note, the report also showed that more Canadians are paying their bills on time. Default rates have came down by a considerable margin since the recession in 2008-09 and have remained low in the last quarter.
This is consistent with other reports that show consumer bankruptcies have fallen back to normal levels after reaching a high in 2009.
The debt load rose in all provinces except Saskatchewan, while the yearly debt load dropped in Alberta.
Sources: CTV, Toronto Star