Despite continued warnings from the Bank of Canada, Canadians can't seem to resist the allure of low borrowing rates, racking up a 6 per cent increase in personal debt in the fourth quarter of 2012, compared to a year earlier.

That's according to a new report from TransUnion, which says Canadians now owe an average of $27,485 in personal debt -- an increase of $1,525 from the end of 2011.

Under TransUnion’s definition, personal debt excludes mortgages but includes car loans, credit cards, lines of credit and the like.

The year-over-year increase was the largest of its kind for a fourth quarter since 2009, when the year-over-year increase was 8.9 per cent.

From the third quarter of 2012 to the fourth, the average debt level increased by 2.7 per cent, the largest jump since 2008.

Thomas Higgins, TransUnion's vice president of analytics and decisions services, said Canadians' average debt levels typically go up in the fourth quarter as people spend more leading up to the holidays. However, Higgins said he is concerned to see Canadians' debt load increasing so significantly compared to a year earlier.

When the numbers were broken down by province, the increase was consistent in all regions except B.C., where average debt actually decreased by 0.09 per cent, year-over-year.

“Balance changes were as expected, though British Columbia's drop was the most eye-opening observation from the data,” Higgins said. “It should be noted, though, that British Columbia has among the highest debt levels in the nation.”

The highest increase in average personal debt was in Alberta, where debt levels rose by 11 per cent between the third and fourth quarters, and by 11.2 per cent year-over-year.

Quebec was also in the top-three with a 9.4 per cent year-over-year increase, followed by Prince Edward Island at 9 per cent.

Following are the average personal debt levels for key provinces in the fourth quarter of 2012 (fourth quarter of 2011 in brackets):

  • Alberta: $37,377 ($33,613)
  • B.C.: $37,244 ($37,276)
  • Ontario: $26,901 ($25,135)
  • Quebec: $20,102 ($18,376)

On the positive side, TransUnion said delinquency rates remain low in Canada.

“It's an especially positive sign to see lines of credit, which make up the majority of personal debt when excluding mortgages, experience yearly declines in delinquencies.”

Nadim Abdo, Equifax vice president of consulting and analytical services, told CTV News Channel that while the debt increase may be a cause for concern, the six-per-cent increase is substantially lower than the double-digit increases from a few years ago.

“It’s all relative,” Abdo said Tuesday. “Yes we do see growth in credit continuing, but we’re looking at a three of four per cent rate of increase -- nothing like the double digit growth we had a couple years ago.”

Abdo described the current lending environment as one of “controlled growth.”

“Overall it’s not such a bad picture,” he said. “We still are spending more… but I think we are being smarter about it.”

He said consumers are beginning to realize that with interest rates so low, it is wiser to pay down their debt faster.

He also said that while there’s more credit available, utilization of the credit has remained fairly flat.

“As the debt increases, the level of utilization – how much is being used – remains fairly constant over time,” he said.

Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have warned repeatedly that the low overnight lending rate of 1 per cent will eventually increase, which will push up borrowing costs, and Canadians shouldn't over-extend themselves.

However, in his most recent update in January, Carney said he was pushing back plans to increase the borrowing rate, because going forward "economic activity is expected to be more restrained."