Canada’s Consumer Debt Situation Not As Bad As We Thought

Some positive news out of a recent CIBC report shows that Canadians have significantly slowed down their accumulation of consumer debt over the last year. While total debt rose 1.8% over the last quarter, outpacing the 0.7% increase in income, consumer debt (that is, total debt minus mortgage debt) rose at the same rate as income. In fact, it is expected that consumer debt will experience negative growth rates in the second half of 2011.
The topic of Canadian household debt hit the headlines in June when it was reported that it reached a record level of $1.5 trillion, with a debt-to-income ratio of 147%. The CIBC report eases those concerns somewhat by clarifying that those figures were being driven by increasing mortgage debt. In fact, the yearly growth rate of household debt is down to its lowest levels in nearly a decade, while consumer debt is growing slower than it has in two decades.
The news is quite positive, particularly given the fears that we, as a nation, were entering US level debt. In fact, it is our strong real estate market that has inflated those numbers. Nevertheless, for those conscientious consumers interested in paying off their debt as soon as possible with the lowest amount of interest, options such as a second mortgage or a home equity line of credit should be considered fruitful avenues of savings.