credit and debt
BORROWER BEWARE: CAR LOANS AND CREDIT CARD DEBT GROW Debt can be a very useful tool for consumers; it must, however, be deployed strategically.
Recently, the slowdown in debt accumulation in Canada has been uneven. Overall, the total outstanding balance owed by Canadians to the big banks rose by 5.1% between Q2 2017 and Q2 2018, down from 6.4% growth during the previous year—on the surface, that’s a good thing. Dig a little deeper and the picture becomes a little more muddled: the slow down in the growth of monies owed to banks has been entirely on the back of slower growth in outstanding mortgage balances; meanwhile, balances on HELOCs (Home Equity Lines of Credit), credit cards, car loans, and other lines of credit have all grown at an accelerated pace, led by a 6.3% increase in
outstanding car loan amounts (versus 5.3% in the previous year). While HELOC and LOC (Line of Credit, or credit not backed by one’s home) growth has been more modest than this (a 1.5% and 0.4% rate of growth most recently), it is somewhat concerning that credit card balances expanded by 5.9% in the four quarters to Q2 2018. Growth in this slice of the debt pie masks levels of consumer spending that are beyond what incomes can (or should) support. To the extent that credit card balances are eventually serviced, the associated high interest costs will, in the meantime, take a bite out Canadians’ wallets.
ANNUAL DEBT GROWTH: THE GOOD, THE BAD & THE UGLY ›
10.0%
8.9%
8.0%
6.4%
6.3%
5.9%
6.0%
5.3%
5.1%
5.0%
4.1%
4.0%
2.0%
1.5%
0.4%
0.0%
- 1.5%
-2.0%
- 2.6%
-4.0%
ALL
MORTGAGE
HELOC
CREDIT CARD
AUTO
LOC
OUTSTANDING BALANCE BILLIONS
$1,851.4
$1,231.7
$203.2
$98.2
$73.0
$59.0
Q Q ANNUAL AVERAGE
Q Q
SOURCE: MORTGAGE & CONSUMER CREDIT TRENDS, CANADA MORTGAGE & HOUSING CORPORATION
24
rennie.com
Made with FlippingBook - professional solution for displaying marketing and sales documents online