A new report by analysis firm TransUnion has revealed that Canadians have returned to their debt-loving ways last year and the behaviour is expected to prevail as low interest rates emerge.
The study found the average balance per consumer – excluding mortgages – was up 2.3 per cent in Q4 2014 to $21,428 from $20,945 in 2013.
“Canadians began to deleverage during the latter half of 2013, but our latest data show that consumers once again increased their balances throughout much of 2014,” said Jason Wang, TransUnion director of research and industry analysis.
“This trend is likely to continue after the recent rate cut by the Bank of Canada made borrowing more affordable.”
Just last week, the International Monetary Fund cautioned that Canadian household debt levels are well above those in other Western countries.
Data showed the number of Canadians with financial difficulties soared 22 per cent in the first two months of this year compared to the same period in 2014.
“We find these numbers troubling but not surprising based upon what we’re seeing,” said Scott Hannah, president and chief executive officer of the non-profit Credit Counselling Society. “We’re seeing that savings levels are substantially lower than what they need to be at or have been historically.”
He added that there is very little motivation for people to save money, thanks to the low-rate environment.
“I’d say that [lower delinquency rates] is going the right way if debt wasn’t going up at the same time. If debt was declining as well as the delinquency rate, then I would say real progress is being made.”
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