WATCH: Global’s Sean O’Shea reports that Canadian debt is at an all time high.
The average total debt owed on things like new cars, vacations, shopping or just paying the bills now stands at $20,891 per person in Canada.
That figure — which excludes the biggest line item in many people’s budgets, their mortgage – is up nearly 3 per cent versus a year ago, according credit monitoring agency Equifax Canada.
Regina Malina, a senior director at Equifax, said the rising indebtedness of Canadians, which now meaningfully exceeds household debt levels in the United States, is “worrisome.”
MAP: Debt levels rise fastest east of Ontario as jobs, incomes lag behind
Ultra low rates
Still, ultra-low interest rates on those debts are easing the repayment burden, with delinquencies and defaults sitting near record lows, Equifax said. The number of Canadians unable to meet their repayment obligations ticked lower during the latest three-month stretch, according to data released Wednesday.
“While the debt numbers are worrisome, it’s certainly positive to see delinquency and bankruptcy rates inch down each quarter,” Malina said.
Auto boom
Auto lending and general purpose “instalment” loans were the fastest growing areas of debt growth, Equifax said. As interest rates have remained low, auto sales have boomed for a second consecutive year and are on pace to set a new record in 2014.
Longer and bigger loans have stoked car sales higher, but new loan products have raised concerns about over-leveraging borrowers. Industry executives from auto companies and lenders said at a conference last month car loans spanning as long as eight years posed a growing risk to buyers.
Borrowing for gifts
Debt levels are also expected to continue to rise as shoppers run up credit cards over the holidays. The fourth quarter ends Dec. 31, with final data available sometime early next year.
“Following a frenzied start to the festive shopping season with more to come in the countdown to Christmas, we can expect the consumer debt to rise even further,” the Equifax executive said.
Still, that sentiment is being challenged now by crumbling confidence among consumers. Faltering oil prices have darkened consumers’ moods, notably in oil producing provinces.
That could make for fewer presents – and a slowdown in debt growth — this holiday season, some say.
Shaken confidence
Monthly figures released by the Conference Board of Canada have shown a steady decline in consumer confidence since August. “November’s decline was driven in large part by a drop in the Prairie region,” the Ottawa-based researcher said.
Confidence in Alberta, Saskatchewan and Manitoba has generally been higher than the rest of the country this year with economic growth easily outpacing the rest of the country.
WATCH: Canada’s consumer debt load now sits at $1.5 trillion. Despite that number, some say it’s not cause for alarm in Alberta. Kendra Slugoski explains.
But fears are mounting over a prolonged downturn for energy prices which could impact regional jobs and income levels, resulting in a bigger tumble in each province’s outlook.
MORE: Oil’s sharp drop rattles Prairie consumers ahead of holidays
“The results were not unexpected given the rapid and severe decline in crude oil prices over the past month,” the board’s report from this week said.
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