Canadians’ debt drops dramatically in first quarter
Average consumer debt in Canada, excluding mortgages, fell by 2% to $26,935 in the first three months of 2013 from the fourth quarter in 2012.
An analysis by TransUnion Market Trends has revealed that Canadian non-mortgage consumer debt decreased by 2% in the first quarter of 2013, the first quarterly drop since 2011.
In light of the Bank of Canada's most recent decision to once again keep the benchmark overnight rate at the historically low 1%, Canadians are urged to stay cautious about borrowing so they aren't caught in a difficult position when interest rates eventually rise. According to TransUnion Vice President Thomas Higgins, the average Canadian pays approximately $1,398 in interest per year on lines of credit, which would increase by $350 if interest rates rise by one percentage point.
The analysis also shows that delinquency rates on all credit products are still low. This is a positive sign, as borrowers' credit reports are becoming more and more important when applying for a mortgage.