We’ve talked at length about household debt, and how Canadians have seemed to be taking on more and more each year. It’s all anyone has seemed able to talk about lately, in fact, with the Department of Finance and Bank of Canada being especially concerned about the high levels that have been seen lately. Now though we’ve learned of some of the best news we’ve heard in nearly a decade. According to TransUnion Market Trends, household debt has seen the biggest drop this quarter in almost ten years, since 2004.
The recent Market Trends report shows that average non-mortgage debt fell by 2 per cent in the first quarter of 2013 when compared with the last quarter of 2012. And that currently on average, Canadians hold about $26,935 in non-mortgage debt.
While that number is down and certainly something that will give policymakers some encouragement, it’s still 3.5 per cent higher than it was at this same time last year. And that may be one reason why Thomas Higgins, TransUnion vice president, says that while the recent stats certainly seem hopeful, it can’t yet be called a trend. He also says that we saw this same thing happen in 2011, when debt levels fell drastically only to increase to even higher levels in 2012.
“Consumer debt levels are typically softer in the first quarter of the year as many people pay off charges made during the holiday season,” says Higgins.
And paying off those charges has never been more important. Higgins says that the average Canadian currently holds about $1,398 in interest charges, and that’s what they pay every single year on lines of credit alone. Those charges, should interest rates rise by one point, will go up by $350. And if the rate goes up by 2 points, that interest alone could get a boost of about $699. And those rates will rise at some point. The Bank of Canada has held their historical lows for over two years now, and they’ll have to go up at some point. That’s likely to be sooner rather than later.
Another note from the recent report – B.C. has taken over Alberta as the province with the highest debt, with credit debt rising 3.7 per cent in the most western province.