Canadian Household Debt Still Growing, Now 166.9% In Third Quarter Of 2016
(NEW WESTMINSTER, BC, - December 14, 2016) According to a report released by Statistics Canada Wednesday, the Canadian household debt ratio reached another record high just as consumers head into the holiday season. The latest numbers show that the debt burden among Canadians hit 166.9% of disposable income in the third quarter of 2016, up from the previous quarter’s restated number of 166.4%.
“Low interest rates are helping to keep the economy under control, but this isn’t something that will continue for a prolonged period of time,” Hannah stated. “It’s tempting to take out more loans and use up credit since interest rates are so low, but when interest rates increase, it’s going to leave many Canadians in greater financial difficulty.”
The new household debt ratio means the average Canadian owes nearly $1.67 for every $1 in disposable income they earn in a year. This is a 2 1/2 point increase in just one year - in Q3 2015, the ratio was 164.5%, a record high at that time. And with interest rates holding steady, some critics have argued that the continued low interest rate environment is spurring Canadians to take on more debt than they can carry.
To further prove his point, Hannah highlights the challenges faced by the Prairie provinces. According to Equifax Canada, 90 day delinquency rates on non-mortgage debt rose dramatically in Alberta, Saskatchewan and Manitoba in the third quarter as well, a result of the ongoing sluggishness in the economy in those areas.
“The Prairies had an external shock – a drop in oil prices. Through no fault of their own, a job loss or a cutback in hours reduced disposable income, and made paying the bills more difficult.” says Hannah. “You don’t get much warning when a life change is going to happen, you have to be prepared. A big part of being prepared is making sure you can manage when times get tough.”
Hannah is quick to add that 90 day delinquencies are not the only measure that individuals should measure themselves by. Making minimum payments on debt is the first indication of a problem down the road.
“The best thing consumers can do, especially during the holiday season, is to pay down what they owe instead of taking on more debt,” said Hannah. “It’s easy to get carried away with our spending during the holidays, especially if we don’t know how to manage our money. So this holiday season, having a budget really is a great gift to yourself.”
About the Credit Counselling Society (CCS)
The Credit Counselling Society is a non-profit organization dedicated to helping consumers manage their money and debt better. CCS provides free, confidential credit counselling, debt repayment options, budgeting assistance and financial education.