Canadian consumer debt level hits record high
Published Thursday, August 23, 2012 8:56AM EDT
Last Updated Thursday, August 23, 2012 11:56PM EDT
Despite worrying economic signs globally and near-constant warnings from financial leaders at home, Canadians are racking up higher-than-ever debt levels.
That's according to a report released Thursday from TransUnion, showing the average Canadian's total non-mortgage debt reached $26,221 in the second quarter of 2012 -- marking the highest level since 2004 when the credit bureau first began tracking debt levels.
The Q2 debt numbers only mark an increase of $192 in average debt over the previous quarter. But significantly, it is the second consecutive quarter in which debt has risen, along with a year-over-year increase.
"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,” Thomas Higgins, TransUnion's vice president of analytics and decision services, said in a statement.
“It's quite possible that this is a trend that will continue as consumers take advantage of the low interest environment."
But Higgins warned that although deliquency rates are down, any sudden economic changes, such as a rise in unemployment or an unexpected jump in current rock-bottom interest rates, could mean indebted Canadians will find themselves struggling to cover their payments.
Susan Reid was among those Canadians who fell into a credit-card trap, spending money she didn’t have for years.
“It wasn’t good. It was really destructive,” the Winnipeg resident told CTV News.
She thought she could rely on her credit cards after her salary was cut, but every month, she fell further behind.
“I had no way of seeing how to climb on top, I just kept getting buried,” Reid recalled. She has spent the past four years trying to pay off her debt.
While Bank of Canada Governor Mark Carney has kept interest rates low as part of economic recovery efforts, he has also consistently warned that Canadians are taking on too much personal debt.
Finance Minister Jim Flaherty has also shared that view publicly, urging Canadians to be responsible with their debt levels and even making it more difficult for Canadians to get a mortgage.
But despite the warnings, debt levels across all the provinces except Saskatchewan, grew in Q2, according to TransUnion. Alberta increased from Q1 to Q2, but saw a slight dip from it's numbers from a year earlier.
The report also showed that across the board, delinquencies dropped on both a quarterly and yearly basis.
Following are some key findings from the report:
• While average credit card debt dropped .93 per cent on a year-over-year basis, it increased 2.7 per cent between Q1 and Q2.
• Debt from lines of credit dropped .40 per cent year-over-year, and fell 1.13 from Q1 to Q2.
• Canadian instalment loan debt increased 0.95 per cent year-over-year androse 2.37 per cent from Q1 to Q2.
• Canadian car loan debt saw the most significant increase, rising 13.25 per cent year-over-year, and 3.67 per cent from Q1 to Q2.
With a report from CTV’s Richard Madan