Canadian Debt Levels Increase 400% Faster than Inflation

Canadian debt levels have increased rapidlyLooks like Canadians are still spending a bit too much – and they’re using their credit cards to do it. The average Canadian debt levels (not including mortgage-related loans) grew to $26,768 according to a discouraging quarterly analysis released by credit reporting agency TransUnion.

According to the report, this marks a 4.6 per cent year-over-year growth in the third quarter.

“It’s almost been two years and it’s the largest year-over-year increase we’ve had and I think it’s the largest quarterly increase we’ve had during that time period as well,” said Thomas Higgins, TransUnion’s vice-president of analytics and decision services.

A Change in Direction

The growth follows three relatively stagnant and uplifting periods where household spending seemed to be slowing down likely as a result of continuous economic turmoil.

But the report also showed more troubling sign with mounting debt.

In the past five years, debt has risen 400 per cent more than the rate of inflation – with inflation (as measured by the Consumer Price Index) climbing nine percent while consumer debt jumped more than 37 per cent.

Trouble Keeping Up

“Debt’s outpacing us and continues to outpace us, so at some point in time there’s going to be a reconciliation,” added Higgins in the report. “Hopefully it’s not drastic and hopefully it doesn’t hit everybody, but there’s going to be a correction somehow along the way.”

But despite repeated warnings of “out of control spending” from Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty, Canadians seem to be becoming ambivalent to their spending habits.

Holiday Spending Won’t Help

Higgins points to less in the news about the continuing financial crisis abroad and at home. However, doesn’t expect spending to curb anytime soon with the holidays just around the corner.

“We’re moving into the Christmas season, so I anticipate we might see another high increase year-over-year when we get to the Q4 numbers when we get some Christmas spending in there,” says Higgins.

An Increase in Big Ticket Purchases

But it’s not the little items that lead the growth so much as big ticket items put off during the recession.

According to the report, auto loans experienced an 11 per cent growth year-over-year in to $19,228.

“During the recession people held off on buying the new car, they refinanced the lease or continued with what they had longer than they would have,” Higgins noted.

Installment loan borrower debt also saw a rise, growing 2.3 per cent over the third-quarter of last year to an average of $22,849.

But it wasn’t all bad news with the average Canadian’s credit card debt resting at $3,573 – down one per cent year-over-year.

Line of credit debt also fell 0.2 percent year on year to sit at $34,050.

Related Topics

Debt Repayment / Economic News / Personal Finance / Personal Finance News

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