Consumer debt loads went down last quarter for 1st time in a decade

Consumer debt loads inched lower in the first quarter of 2020 for the first time in more than a decade, Canada's largest credit monitoring firm said Tuesday.

Young people and seniors borrowing less, while those 46-65 are still racking up debt

COVID-19 seems to have prompted many Canadians to borrow less, but the typical person still owes more than $23,000 in consumer debt, Equifax says. (Chris Ratcliffe/Bloomberg)

Consumer debt loads inched lower in the first quarter of 2020 for the first time in more than a decade, Canada's largest credit monitoring firm said Tuesday.

Equifax says the average Canadian had $23,386 worth of consumer debt as of the end of March. That's down by 0.49 per cent from a year ago.

The COVID-19 pandemic that led to widespread shutdowns in the economy starting in mid-March was a major factor in the numbers, Equifax said.

"With stores and restaurants shut down, consumers were able to cut back on their spending in March as retail sales numbers indicated," said Bill Johnson, Equifax's vice-president of data and analytics, in a release.

"The result was a plunge in credit card spending that translated into much lower balances. That trend gained momentum in April, with few signs that consumers are looking to debt for support in the early days of the pandemic."

Bankruptcies fell

A lack of demand for credit card debt, despite huge shortfalls in income because of layoffs and work furloughs, is likely a sign that massive government support programs such as the Canada Emergency Response Benefit are having their desired effect and keeping people financially afloat.

Earlier numbers from the federal government showed personal bankruptcies fell to an all-time low in April, a trend that seems to be supported by Equifax's findings.

Despite the lull in bankruptcies, Equifax projects it won't last forever, as there are already signs that delinquency — the term for being more than three months' behind on a debt payment — is growing.

The delinquency rate is still below two per cent in every province across the country, it is growing at a more than 10 per cent annual pace in many places, including Ontario, B.C. and Alberta. If that continues, it means far more people are falling further and further behind on their bills.

"Bankruptcies finally slowed and we know April was also very low as services shut down," Johnson said. "Unfortunately, that trend will likely not continue, as we expect delinquencies and bankruptcies to rise in the latter part of the year."

While the overall picture is one of slowing growth in debt loads, the situation is different across the country and among different demographic groups.

Younger people and older people borrowed less, while middle-aged people borrowed more. The average 18 to 25 year old had $8,588 in consumer debt as of the end of March, a decline of 1.03 per cent from a year earlier.

People between the ages of 46 and 65, however, borrowed more. While seniors owed an average of $16,214, a decline of 0.45 per cent from last year's level.

By province, people from Alberta had the highest debt loads, at $28,615 on average. But while they owed the most, Albertan debt loads have fallen by 1.72 per cent. At the opposite end of the spectrum, the average person in Manitoba owed $18,449 in consumer debt, a figure that has fallen by 1.95 per cent in the past year.


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