credit and debt
03. credit & debt The ongoing battle against inflation is having a predictable impact on Canadian credit: high interest rates are yielding less borrowing.
YOU CAN BET CANADIANS ARE TAKING ON LESS NEW DEBT
It should come as no surprise that borrowing has abated in Canada of late. The Bank of Canada’s restrictive monetary policy is aimed at doing just that, disincentivizing borrowing and spending, and incentivizing saving. Of course, there are plenty of other outcomes, many of which we explore in other sections in the rennie landscape, but the primary motivation is to cool demand and reduce spending. Canadians certainly borrowed (to spend) a lot less in 2023, overall borrowers took on $101 billion in new borrowing last year. Not only is that 42% less than the previous year’s $175 billion, but also the lowest annual total since 2020. This is all the more noteworthy when we consider the record-setting population growth we’ve experienced since then.
Mortgage debt was once again the main driver of household credit last year (accounting for 74% in 2023) with $75 billion in new mortgage debt extended, though that was a smaller share than in 2022 (at 83%). The main reason for the change is consumer credit (which includes credit card debt that we’ll look at more closely later on) which saw its share grow from 15% in 2022 to 21% in 2023 with Canadians adding $21 billion last year. That still represented a year-over-year decline (of 20%), while non- mortgage credit increased by 20% to $5 billion, but only accounted for a 5% share last year. It’s a good thing for Canadians that they took on substantially less new debt in 2023 than in previous years, especially given the significant amount of borrowing they had previously undertaken, which as we’ll see later on, is requiring more income to service than ever before.
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