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CP | By LuAnn LaSalle, The Canadian PressPosted: 02/26/2014 8:29 am EST | Updated: 02/26/2014 10:59 am EST
MONTREAL – Canadians are still on target for a record year of personal debt despite ending 2013 by making a small dent in the money they owe, says credit monitoring agency TransUnion.
At the end of last year, Canadians owed a total of $27,368 on such things as lines of credit, credit cards and car loans, TransUnion said in a study released Wednesday.
That’s down $117, or 0.42 per cent, from $27,485 in the fourth quarter of 2012 — the highest level of non-mortgage debt on record.
“We’ve been told over and over and over again from so many places that we’ve got to get this debt down and we can’t make it happen,” said Thomas Higgins, TransUnion’s vice-president of analytics and decision services.
TransUnion is sticking by its prediction that average consumer’s total non-mortgage debt will hit an all-time high of $28,853 by the end of 2014.
“There’s nothing to give us any indication that the debt levels are going to start to come down in any noticeable chunk,” Higgins said from Toronto. “Right now, we’re still trending in that direction (to higher debt), for sure.”
Higgins said Canadians started to pile on debt in the years before the 2008 recession. He said he’d have to see Canadians’ personal debt being reduced consistently by $500 to $1,000 over four to six quarters before he would say “we’re sorting of heading somewhere.”
In the last quarter of 2013, consumers’ credit card debt and debt on lines of credit were down a bit, Higgins said.
But consumers spent a little less on holiday shopping only because they got “better deals” rather than consciously cutting spending, he said.
The study also found that loan delinquencies in the quarter ended Dec. 31 were down, meaning that consumers were making minimum payments on their debts.
“We may not be paying all of it, but we’re paying enough down so that you’re still in good standing.”
But Higgins cautioned that if anything impacts the economy, the markets or interest rates, delinquency rates are usually impacted first.
Meanwhile, the study also found that Vancouver residents experienced the biggest increase in consumer debt, hitting $41,077 at the end of last year, up seven per cent from $38,357 in 2012.
On the other hand, those in Montreal managed to reduce their debt by 5.5 per cent from $19,651 to an average of $18,563, the lowest among residents of all major Canadian cities.
Higgins said Vancouver generally has higher incomes allowing consumers to take on more debt, while consumers in Montreal usually save to buy bigger items or pay with debit cards.
In a report on Tuesday, Statistics Canada said Canadian families have become wealthier over the past several years, with net worth rising despite the well-documented growth in household debt and a setback from the recession.
However, there were big differences across age groups, regions and family types and economists noted that the biggest single reason overall for the improvement was rising house prices, which are widely expected to moderate or even fall in the next few years.
CP | By Linda Nguyen, The Canadian Press
Posted: 02/10/2014 4:00 am EST | Updated: 02/10/2014 6:59 am EST
TORONTO – The love affair Canadians have with debt is still going strong, according to a new report by credit monitoring agency Equifax Canada.
Equifax said Monday that its figures show that consumer debt, excluding mortgages, rose to $518.3 billion through the end of November 2013. That was up 4.2 per cent from $497.4 billion a year earlier.
Despite the increase in debt, however, the overall delinquency rate — bills due past 90 days — declined to a record low of 1.12 per cent from 1.19 per cent in the same period of 2012.
“The real pattern that we’ve been observing is that Canadians are taking on more debt, but they can handle it well and are making those monthly payments,” said Regina Malina, director of analytics for Equifax.
Meanwhile, overall consumer debt, including mortgages, also continues to rise — up 9.1 per cent to $1.422 trillion from $1.303 trillion a year earlier.
Malina says the data shows that Canadians are willing to take on more debt — from car loans to credit card purchases — but are more aware of how important it is to keep their debt levels under control.
High debt levels are not a big concern in current conditions, which signal a stabilizing economy, improvement in the unemployment rate and an anticipated gradual increase in interest rates.
But Malina says if any or all of these conditions change, Canadians should reconsider how much debt they are piling on.
“That is the reason why we should remain vigilant,” she said. “It’s easy to get complacent. Even if the debt is up, and the delinquency is going down, it is no cause for alarm but as I said, we have to watch out for these other economic factors.”
Equifax uses data from 25 million files on consumer credit history, including national credit cards, loans and mortgages in compiling the report each quarter.
Credit-monitoring agency TransUnion says the non-mortgage debt of Canadians is likely to set a record next year.
In its first such annual forecast, TransUnion predicts the average consumer’s total non-mortgage debt will hit an all-time high of $28,853 by the end of 2014.
That would be about $1,100 more than the $27,743 of debt consumers are expected to have at the end of this year.
TransUnion says car loans are expected to drive the increase in such debt, which also includes credit card debt, lines of credit, student loans and the like.
On the plus side, the credit-monitoring agency says it expects loan delinquency rates to continue to decline in the coming year, falling to 1.66 per cent at the end of 2014 compared with 1.76 per cent forecast for the fourth quarter of this year
Both figures are down from 1.93 per cent in 2012 and 2.87 per cent in 2009.
“The average Canadian consumer’s total debt is expected to rise by four per cent in 2014, which would be more than $4,500 higher than what we had observed five years earlier in 2009,” Thomas Higgins, TransUnion’s vice-president of analytics and decision services, said in the report.
Higgins noted that while the 2014 increase is much greater than the expected one per cent rise in 2013, it is in line with consumer debt growth of recent years.
“In recent years, the increase in auto sales has helped propel the total debt number and we believe auto captive loans will once again be a driver of this increase in 2014,” he said.
“Instalment loans also have played a major role and we don’t expect there to be a material change in this trend,” he added.
While TransUnion expects delinquency levels to drop next year and remain significantly lower than just a few years ago, “there is a slight concern that delinquencies could rise once interest rates increase,” Higgins said.
However, he added that at this time “we do not believe interest rates will rise enough to materially impact delinquency levels.”
Canadians’ debt ratio increased last quarter, but so did the value of their assets, so the national net worth increased. (The Associated Press)
The amount that Canadians owe compared to their disposable income rose to an all-time record last quarter, although their net worth also increased.
Statistics Canada reported Friday that the level of household credit market debt to disposable income increased to 163.7 per cent in the third quarter from 163.1 per cent in the second quarter.
That means Canadians owe nearly $1.64 for every $1 in disposable income they earn in a year.
‘The seasonal bounce in mortgage borrowing in the previous quarter picked up into the fall’– Royal Bank economist Laura Cooper
Policymakers are fixated on the debt ratio in part because it was at above 160 per cent that households in the United States and Britain ran into trouble about five years ago, contributing to defaults and the financial crisis that triggered the 2008-09 recession.
Debt loads can be influenced by seasonal factors, and although the headline figure is higher, the rate of growth in that ratio was the smallest in 12 years.
“Those figures should be encouraging for policymakers and suggest that the Bank of Canada’s belief that imbalances are evolving constructively is right on the mark,” said Benjamin Reitzes, a senior economist with BMO Capital Markets.
Indeed, while they are borrowing more, Canadians are also worth more as their assets increase by a similar amount. The national net worth increased to $7.5 trillion in the third quarter, up 2.1 per cent from the previous quarter.
On a per capita basis, that works out to $212,700 for every Canadian. The previous quarter, that figure was $208,300.
Canadians saw their financial assets go up in value, as well as their non-financial assets (such as houses) do the same. The value of shares and other equities gained 3.7 per cent in the quarter, while the value of household real estate gained 1.5 per cent.
“The pace of debt accumulation picked up slightly in the third quarter as the seasonal bounce in mortgage borrowing in the previous quarter picked up into the fall,” Royal Bank economist Laura Cooper said.
With files from The Canadian Press
cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll.
Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.
Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged.
Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.
The RBC poll found that the number of Canadians who are anxious about their debt levels has risen four percentage points in the past year, to 38 per cent. Still, the same number said they are comfortable with the amount they owe.
The household debt-to-disposable income ratio is at an all-time high, around 163 per cent. That means for every dollar Canadians earn, they owe $1.63.
However, in its latest monetary policy report, Canada’s central bank slashed its economic outlook for Canada for the next three years and indicated that a troubled global economy may compel it to maintain interest rates at the current near record low rate of one per cent, where it has been since 2010.
The announcement left many observers wondering whether the prolonged low interest rate environment will increase the likelihood of a housing correction or hard landing for borrowers when rates finally rise.
The RBC poll was conducted by Ipsos Reid from Aug. 22 to 27 through an online sample of 2,108 Canadians with an estimated margin of error of plus or minus two per cent, 19 times out of 20.
- Three-quarters of Canadians polled have personal debt: RBC survey (canadianbusiness.com)
- Average personal debt at nearly $16,000: poll (globalnews.ca)
- Three-quarters of Canadians are in the red with average personal debt of $16K: poll (o.canada.com)
- Consumer appetite for debt returned in spring (globalnews.ca)
- Debt by numbers: Troubling trends in Canadian consumer spending (theglobeandmail.com)
- Canadians’ appetite for debt rises in second quarter (bnn.ca)
- Canadian consumer debt rises to $27,000: TransUnion (thestar.com)
- What debt problem? Canada’s delinquency rate falls (globalnews.ca)
- Consumer debt rising but delinquency rate improving (cbc.ca)
- Debt levels rise for Canadians and especially seniors, report suggests (macleans.ca)
- Consumer debt is soaring. That’s good news (for now). (washingtonpost.com)
- Canada household debt remains at record high (bnn.ca)
- Household debt grows as manufacturing lags (bnn.ca)
- Bank of Canada’s Mark Carney eyes three factors as rate hike guide (business.financialpost.com)
- Bank of Canada’s Carney says eyes three factors as rate hike guide (xe.com)
- Consumer debt in Canada hits half a trillion (beaconnews.ca)
- UPDATE 1-Bank of Canada’s Carney sees little rate-hike pressure (xe.com)