Maclean’s Magazine recently wrote an eye-opening article about how much Canadians love their credit cards. Canadians like to take pride in the fact that we escaped the financial crisis in 2008 relatively unscathed compared to our neighbours to the south. While that may be true, the Canadian and U.S. economies appear to be heading in opposite directions.
With the low interest rate environment showing no signs of going away anytime soon, Canadians don’t seem to be in any hurry to repay their debt. The latest household debt figures reflect this. The Canadian household debt to income ratio reached a new high of 163.7 percent in the third quarter, according to StatsCan. That’s up from 162.7 percent in the second quarter, as household debt continues to rise faster than income. In layperson’s terms, that means for every dollar of disposable income, the average household has about $1.64 in debt.
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The debts of Canadians in oil-rich provinces are starting to catch up with them. Households in resource-dependent provinces like Alberta, Saskatchewan and Newfoundland are dealing with the aftermath of lower oil prices. During the boom when oil was at over $100 per barrel, Canadians in those provinces were loading up on consumer debt. But now that the bust has arrived, these same Canadians are having a tough time dealing with their credit card and other personal debt.
Are you struggling to cover your household expenses? You’re not alone. 4 in 10 Canadians admitted to struggling to cover their household expenses at least once in the last year, finds a new survey from Manulife Bank.
Nearly a quarter (24 percent) found themselves “caught short” without enough money in their bank account to cover their household expenses once or twice in the last 12 months, while 10 percent were caught short a few times a year, and 4 percent were caught short nearly every month.
Canadians are doing a better job of paying down debt, finds a new report from TransUnion. This shouldn’t come as any surprise. The low interested rate environment is making it easier for Canadians to repay debt on time. The delinquency rates (accounts 90 days or more overdue) have never been lower, sitting at 2.60 percent in the third quarter, down from 2.75 percent last year and a 5.5 percent improvement from the 2.75 delinquency rate in the third quarter of 2014. Delinquency rates have been between 2.58 and 2.66 percent over the last three quarters.
With home prices heading into the stratosphere, Canadians keep piling on debt at a record pace. Household debt increased by 5 percent in the last year to a whopping $1.88 trilling, says RBC in its latest credit report. Most of that was from mortgage debt, which increased by 5.9 percent to $74.7 billion in the last 12 months.
