credit and debt
CAPTIVE TO EASY CREDIT There are strategic ways for Canadians to financially leverage themselves. Adding credit card, line of credit, and car loan liabilities is the wrong way to do it.
To put it simply, there is good debt and there is bad debt. Not all debt can easily be categorized into these two buckets, and the financial circumstances of a borrower factors in significantly when determining whether a particular “investment” is prudent or not. With those caveats stated, it is concerning that Canadians continue to consume non- mortgage debt at an increasing rate. In the year ending in Q4 2018, total outstanding credit card debt was up 5.2%, higher than the 4.7% average growth of the preceding five years. The rate of increase in home equity
lines of credit balances also rose faster (2.5% in the most recent year) than the historical average, as did those of good ol’ lines of credit (a 2.5% increase). While auto loan balances rose at a slowing pace, they still rose faster than other types of debt over the past year, at 6.0%. From a financial perspective, this is not a viable path forward for Canadians over the long-term, and we expect these trends to moderate somewhat in the wake of a slowdown in Canadian housing markets.
PERHAPS DEBIT IS OWED MORE CREDIT ›
8.0%
7.0%
7.0%
6.9%
6.0%
6.0%
6.0%
5.2%
5.2%
5.0%
5.0%
4.7%
4.0%
3.0%
2.5%
2.5%
2.0%
1.1%
1.0%
0.0%
-0.2%
-1.0%
ALL
MORTGAGE
HELOC $206.9
CREDIT CARD
AUTO $77.8
LOC $60.0
OUTSTANDING BALANCE BILLIONS
$1,911.6
$1,268.5
$101.1
Q Q ANNUAL AVERAGE
Q Q
SOURCE: MORTGAGE & CONSUMER CREDIT TRENDS, CANADA MORTGAGE & HOUSING CORPORATION
DATA: CANADA
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