Finance Minister Jim Flaherty and the government of Canada were so worried about household debt levels early last year that they imposed tighter rules on home loans including new mortgage insurance rules and tightening amounts loaned on secured lines of credit. That seemed to work for a little while, until later in 2011 when our household debt levels did what we least expected – they went higher than those in the United States! Now, starting out the New Year, that seems to have been enough to send us into a panic; and now, we’re paying off our credit card bills faster than ever.
This, according to the newest report from Equifax Canada, reporting on the current credit trends around the country. The report shows that in 2011 our credit card debt fell by 3.4%, and the news gets better. Along with paying off our debt, we’re also writing off less of it. The report also showed that our bankruptcy levels are down to what they were before the recession to 1.4% – they were at 1.8% at the height of the financial crisis. And if that doesn’t sound like a huge jump to you, consider that those numbers puts $1.9 billion back into our economy and you can understand just how promising they are.
But we’re not exactly in the clear just yet. Even though our bankruptcy levels are down and we’re paying off our credit card debt, the total amount of debt we’re carrying still increases to rise. This is because our other types of debt including our mortgages and other kinds of debt. So what does this mean for us? That things are pretty good as far as they stand so far, but that we still need to be mindful of the debt we’re carrying, and continue trying to pay it off. The fact that we’ve started with credit card debt, some of the highest-interest debt one can carry, is a good sign. But the low interest rates on mortgages and home equity loans that have helped us pay off that debt won’t be around forever. And when they rise, we need to be prepared for it.
