Canadian household debt measures are showing signs of improvement which is good news. Consumer debt-to-income declined for the second consecutive quarter to 161.8%, as income growth outpaced debt growth.
The good news:
- The decline in the debt-to-income ratio from its peak of 162.6% shows Canadian households are starting to get their financial house back in order. A lower ratio means consumers will be better able to manage their debt on current income levels.
- Growth in total consumer credit market debt (both mortgages and non-mortgages) slowed to just 0.3% in the quarter. This means consumers are no longer adding to their debt levels at alarming rates.
The bad news:
- Consumer credit debt (credit cards, lines of credit, payday loans, etc) still increased 1.1% in the quarter although non-mortgage loans were down 3.2%. Individuals struggling to make ends meet may still be adding to high cost borrowing while some may not be listening to the call to cut back on debt.
- Interest rates are historically low but will likely begin to rise. New Bank of Canada governor, Stephen Poloz, continued to warn that Canadians will need to manage their debt under “more normal” interest rates as he expects the cost of borrowing will rise “at some point”.
Is Your Personal Debt Declining?
The key behind all the statistics is to take this information as a personal warning. You should be managing your own debt at levels you can afford in the long term. If your household debt levels are too high, do something now to get them under control. Take steps to eliminate your debt today.
If you need help, talk to a debt expert about how they can help. You need to take control now, before things get worse.