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Canadians now owe more than $1.5-trillion in consumer debt

Canadians’ debt levels continue to mount – they now collectively owe more than $1.5-trillion – and consumer indebtedness is expected to climb even more over the holidays, a new report says.

But there is one positive sign: the delinquency rate continues to decline, according to credit monitoring firm Equifax Canada.

The average debt held by Canadians, excluding mortgages, has increased by 2.7 percent to $20,891, Equifax Canada’s national consumer credit trends report for the third quarter found.

“Following a frenzied start to the festive shopping season with more to come in the countdown to Christmas, we can expect the consumer debt to rise even further,” Equifax Canada senior director of decision insights Regina Malina said.

“Tis’ the season, so we can anticipate credit cards getting a strong workout throughout December.”

The $1.5-trillion third-quarter debt level – which includes residential mortgages – is up 4.5 percent from $1.45-trillion in the second quarter and 7.4 percent from $1.41-trillion in the year-earlier period, according to Equifax.

The biggest increases were in the auto-loan and installment-loan sectors, at 6.8 percent and 5.8 percent year over year, respectively.

Mortgage debt accounted for $985.1-billion or 65.1 percent of the $1.5-trillion.

The delinquency rate, which tracks bills overdue by 90 days or more, fell to 1.10 percent, from 1.11 percent in the second quarter, its lowest level since 2008.

Bankruptcies were down 1.1 percent in the latest quarter, according to Equifax data.

“While the debt numbers are worrisome, it’s certainly positive to see delinquency and bankruptcy rates inch down each quarter,” Malina said.

“The fact is, while debt figures have gone up, they have increased at a slower rate in the third quarter with most Canadians seemingly still spending within their means.”

The rise in consumer demand for new credit has been fuelled mainly by credit card and auto credit inquiries, Equifax says in the report, published Wednesday.

An extended low-interest-rate environment is the main driver of the continued increase in consumer credit indebtedness, the firm said.

The Bank of Canada and the Finance Department have voiced their concerns over Canadians’ debt levels, warning that some consumers could find themselves in financial difficulties when mortgage rates eventually rise.

In western Canada, demand for credit has increased for six consecutive quarters while activity in the eastern provinces continues to slow, the report said.

A second report also released Wednesday puts the total debt figure as at the end of September even higher: $1.8-trillion.

Outstanding household balances increased 4.3 percent to just under $1.8-trillion from a year ago, according to RBC Economics.

“Renewed vigour in consumer spending and the attendant rise in consumer credit prompted the Bank of Canada to caution that household imbalances could rise further. However, we expect growth in household consumption to stabilize and mortgage growth to resume a downward trend as housing affordability pressures intensify, containing the risks coming from household imbalances,” the report by RBC economist Laura Cooper says.

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