Additionally, high interest rates make it difficult to pay off debt. Minimum monthly payments are on the rise, with the average mortgage notice increasing 12% over the past year.
The Consumer Debt Report, recently released by the Canadian Consumer Credit Statistics Agency TransUnion, shows that in the fourth quarter of 2023, the total consumer debt of Canadians was CAD 2.4 trillion (USD 1.8 trillion), up nearly 3% year-on-year and a record high. About 92% of credit users have outstanding debt, up 3.7% year-on-year.
More Canadians are using credit, with about 96%, or 31.5 million eligible people, using at least one product to borrow money, such as a credit card or auto loan, the report said. This has added about $1 billion ($737,000) to consumer debt, a 3.6% increase over the past year. Meanwhile, the number of new immigrants to Canada opening a credit account for the first time has increased by 46% over the one-year period (2022-2023), leaving them with about $3.5 billion ($2.58 billion) in debt.
In addition, high interest rates make it difficult to pay off debt. Minimum monthly payments are rising, with the average mortgage notice rising 12% over the past year. As a result, more people are defaulting on their loans. The Bank of Canada (BOC) is currently “stuck” in its interest rate policy. Current housing prices also keep interest rates high for a long time, as housing inflation accounts for more than 30% of the Canadian consumer price index. This is also the biggest obstacle preventing the BOC from making a decision to cut interest rates.
These developments forced the International Monetary Fund (IMF) to warn that Canada tops the list of countries with high household debt, large loans with floating interest rates, and a higher risk of default.
On average, Canadian consumers are spending 21.5% more per month on credit cards than they did before the pandemic. Economists say interest rates are expected to stay higher for longer and inflation will continue to weigh on consumers. As minimum payments continue to rise, many Canadians may find it difficult to pay off debt while also paying for everyday necessities.
THANH HANG
Source
Comment (0)