Credit growth slowing despite car purchases

Fresh data suggests Canadians are continuing to pile on consumer debt, but the modest increase suggests credit growth is slowing to crawl-speed. TransUnion’s latest quarterly look at non-mortgage debt shows the average consumer added $69 in non-mortgage debt during the first three months of 2012 from the previous quarter to bring outstanding debt to $26,029.

OTTAWA — Fresh data suggests Canadians are continuing to pile on consumer debt, but the modest increase suggests credit growth is slowing to crawl-speed.

TransUnion’s latest quarterly look at non-mortgage debt shows the average consumer added $69 in non-mortgage debt during the first three months of 2012 from the previous quarter to bring outstanding debt to $26,029.

From last year, consumers are on average $432 deeper into debt.

The recent growth is attributed to a spike in auto loans, offsetting declines in credit card debt, lines of credit and instalment loans.

Car loans rose by more than $2,000, or 12.6 per cent, from the first quarter of 2011 to $18,212.

TransUnion’s Thomas Higgins said even though consumer debt remains high, growth has slowed and in the last year has been skewed by the auto sector.

“This could be seen as a positive,” said Higgins, the credit reporting agency’s vice president of analytics.

“Increases in auto loan debt generally mean more consumers are purchasing vehicles and are effectively managing their debt because they have strong enough credit to qualify for loans.”

In comparable year-over-year periods ending with the fourth quarter of the year, consumer debt growth has slowed from about 10 per cent and higher in 2008 and 2009, to just over five per cent in 2010 and to one per cent in 2011.

The latest quarter’s data shows a slight acceleration but only to 1.66 per cent annualized.

TransUnion also points out that consumer delinquencies remain low and that auto delinquencies are now the lowest in two years.

The Bank of Canada has warned for some time that many Canadians are at risk of getting in over their heads with debt, but the main concern is mortgage and home equity credit, which represents about 70 per cent of all household debt.

According to Statistics Canada, household debt to annual disposable income has been at record highs of over 150 per cent for most the past year.

Analysts note that the debt ratio has continued to rise even though there have been signs of cooling in the housing market, in part because income growth has also eased.

In a report issued Tuesday, the Royal Bank said the first quarter 2012 also saw home affordability decline, meaning the costs of maintaining a residence were increasing as a percentage of income.

Much like housing debt, the TransUnion data shows that residents of British Columbia have the most non-mortgage debt at $37,433, while consumer debt in Ontario is just below the national average, and in Quebec averaged a relatively low $18,475.

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