Is Canada Debt Spinning Out of Control?
Canadian personal debt is on the rise as low interest rates and weak oil prices have increased both consumer debt and delinquency rates in the third quarter, according to a report by Equifax Canada (which is part of Equifax Inc. (NYSE:EFX)).
In fact, the Canada debt for consumers has now surpassed the size of Canada’s economy, accounting for more than 100% of gross domestic product (GDP). The credit reporting agency also found that the average Canadian debt increased by 3.6% to $22,081 in this year’s third quarter versus a year ago. The total Canada debt owed by consumers now numbers $1.702 trillion, compared to $1.587 trillion in the previous year. (Source: “More Canadians Going Bust As Debt Keeps Piling Up: Equifax,” Huffington Post, December 7, 2016.)
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The provinces most affected by this debt hike, and those with highest increase in delinquency rates, are those that had formerly relied on the oil industry. That is, the provinces in Western Canada, as well as the province of Newfoundland and Labrador. But it’s not all bad news for the oil-reliant parts of the country.
“What we are seeing in Western Canada and Newfoundland would be of more concern if people in the two regions hit hard by the oil bust were also piling on a lot more debt and they are not, especially in Alberta and Saskatchewan,” said Regina Malina, senior director of decision insights at Equifax Canada, in a release issued on Wednesday.
Malina added, “The majority of consumers are actually decreasing their debt, but those who are still increasing it are adding larger amounts on average and by enough to increase the total levels. The fact is people who can afford to do so are buying more cars, spending more on housing and borrowing more from financial institutions.”
Low interest rates were pegged as part of the reason that Canada debt is rising, according to the report.
All in all, it’s not Armageddon for Canadians, but the Canada debt for individuals is a situation worth keeping an eye on to see if it is, in fact, going to become too large to handle, or if interest rates will be affected by these types of reports.
