Canadians are continuing to heap on non-mortgage debt, despite warnings about the perils of cheap borrowing from top officials, according to a consumer credit study released Thursday.
Equifax Canada’s quarterly consumer credit trends report found that consumer indebtedness, excluding mortgage debt, grew 3.4 per cent year over year in the first-quarter.
With household debt at an all-time high above 150 per cent of income, the Bank of Canada has declared it the number one domestic risk to the economy.
In a recent interview, bank governor Mark Carney lamented the comfort level of Canadians with high debt, attributing it to the illusion of affordability at a time of sky-high home values and floor-low interest rates.
If house prices fall, however, Canadians could find themselves in a situation where their net assets decline as interest rates and hence their mortgage payments rise. Even a return to normalized rates would render 10 per cent of households financially vulnerable.
For those keeping score, 10 per cent of households in Canada works out to nearly 1.5 million households that would be vulnerable to normal interest rates. Yep, no credit bubble here. Move along.
Year over year consumer credit growth has fallen to levels not seen since the early 90's.