Another day, another story about Canadians in debt.
Yesterday, we published an article about the potential of Canada’s banks to face a significant crisis as a result of alarming consumer debt. This followed news late last year that, for the first time ever, Canadians’ debt burden was greater than the entire Canadian economy. Translation: we spend well beyond our means.
According to Equifax Canada’s 2017 Q4 National Consumer Credit Trends Report, Canadian consumers owe $1.821 trillion as of the last quarter of 2017. Unsurprisingly, the more expensive a city is, the higher the debt burden.
Looking at average year-over-year debt change, residents of Vancouver and Toronto lead the pack. And it’s not even close. In both cities, debt increased by 5.2 per cent from Q4 2016 to Q4 2017.
This makes sense, of course, since the price of renting or owning a place to live in Vancouver or Toronto is about a million per cent of one’s salary.
Especially concerning is that those who are already swimming in debt did very little to ease their burden. “Those who added more debt (37 per cent) did so in larger amounts on average, pushing the average debt held by all Canadians up by 3.3 per cent or $22,837 per person,” reads the report.
So, where is all this borrowing coming from? On a debt classification basis, the installment loan, auto loan and mortgage sectors are showing significant increases of 10.3 per cent, 6.5 per cent and 6.2 per cent year-over-year, respectively.
The good news is that payments are at least on time.
“Despite the high debt, mortgage payments are generally on time, which could be attributed to low unemployment numbers and mortgage and auto finance interest rates which are still at historically low and reasonable levels,” said Regina Malina, Senior Director of Decision Insights at Equifax Canada.
And who’s to blame? Millennials, of course.
“Millennials have had the highest delinquency rates in terms of age, but we’ve seen a nine per cent reduction in their delinquency rate from a year ago,” said Malina.
“Their overall debt has continued to increase, but they seem to be handling their payments better. This situation stresses the importance of financial literacy of younger Canadians.”
Ah, financial literacy – probably a more useful to learn in high school than calculus.