Canadians are paying down debt? Not any more, CIBC report says
Trend since 2009 has been for Canadians to reduce their debt loads but that's changing
Tonight's first order of business, some unwelcome news about our spendthrift ways. After a few of years of improvement, Canadians are taking on more debt. Credit cards, car loans, lines of credit, some of which are easier to carry at low rates (though consumer credit rates remain tortuously high) but all of which could bite us when — not if — rates rise.
We may be feeling a little wealthier, and we are paying down more of the principal on our mortgages, but it's hard to see this news as anything but bad.
— Amanda Lang
Canadians are ignoring those persistent warnings from the federal government, and running themselves into the red. That's according to a new report out from CIBC World Markets.
Canadians have steadily reduced their debt loads since 2009 but that's no longer the case. In the third quarter of this year, household debt jumped four per cent from last year. More troubling is how much consumer debt we're taking on. That refers to outstanding payments on credit cards or lines of credit. It's growing at the fastest pace in nearly two years.
Part of the reason: banks are doling out more cards and increasing maximum limits. Auto loans, too, are way up, by eight per cent from 2013. There is some encouraging news to balance out those strains to some degree. According to the report, "the debt-to-income ratio has stabilized" and "net worth position is at a record high." Which tells us Canadians are digging a deeper hole, because it's getting easier to climb out of it.
Amanda Lang discussed the issue with CIBC's deputy chief economist Benjamin Tal on Wednesday's episode of The Exchange.