Canadians carrying more debt, report finds
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Sep 03, 2014  |  Vote 0    0

Canadians carrying more debt, report finds

But they did a better job of paying it off in the second quarter of 2014, Equifax says

OurWindsor.Ca

Canadians were carrying more debt in the second quarter of 2014 than a year earlier, a report from credit scoring agency Equifax says, but they’re also doing a better job of paying it off on time.

The national debt load rose to $1,447.5 billion in the three months ended June 30, up 7.2 per cent from a year earlier, the agency said in its quarterly National Consumer Credit Trends.

Excluding mortgages, the average Canadian consumer’s debt load was $20,759, the agency also said in a report to be released Thursday.

“Demand for new credit is up, but has slowed significantly versus the first quarter, when we saw a spike in credit card activity,” Regina Malina, senior director, decision insights, Equifax Canada, said in a statement.

“Credit card balances of new cardholders continue to increase, while credit limits and new card issuance have slowed. This may be an indication that promotional activity of credit card issuers is slowing down,” Malina explained.

At the same time, Canadians are doing a better job of carrying their debt load, the agency found.

The national delinquency rate — bills unpaid for at least 90 days — hit 1.11 per cent, its lowest level since 2008, amid the financial crisis and the Great Recession.

“For the most part, Canadians are working within their means to manage their debt effectively,” Malina said.

Canadian households’ debt loads have been rising since 2008, fuelled in part by record low interest rates aimed at kick-starting a struggling economy.

For every $1 Canadians earn, they owe on average $1.64, most of it made up of mortgage debt, according to federal data.

Bank of Canada Governor Stephen Poloz said again Wednesday that elevated household debt loads remain a risk to the economy.

But Equifax’s Malina said she sees no immediate cause for concern.

“It looks like the North American economy is strengthening. The GDP numbers that just came out and the unemployment numbers are showing positive results. There is some conversation in the U.S. they might be increasing interest rates. In Canada, it looks like there might be no disruption to the current (low rate) environment,” Malina said in an interview.

“Our conclusion is there’s no cause for concern just yet,” she said.

Equifax said the amount Canadians owed in the second quarter was also higher than in the first quarter of this year, up 1.8 per cent.

The fastest rising debt loads were installment loans (for example auto loans, where borrowers make pre-defined monthly payments), up 10.8 per cent, while national credit card debt rose 4.4 per cent from a year earlier.

“When stacking the regions up against each other, it’s clear that Alberta remains the biggest driver of new credit. Demand for new credit in the West has increased for five consecutive quarters,” Malina said.

Equifax uses data from 25 million files on consumer credit history, including national credit cards, loans and mortgages, in compiling the report.

Toronto Star

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