Canadians getting better at managing consumer debt, reports Jason Wang, the Director of Research and Analysis for TransUnion, the credit monitoring agency – and he should know. When compared to citizens of other countries, Canadians are making great strides in managing consumer debt.
Canadians are Making Payments on Time
Canadians are showing exemplary self-discipline by making payments by the due date. During the first quarter of 2015, Canadians were better at making timely consumer debt payments than was true in the same period for 2013 and 2014. This reveals that Canadians are more able to make those payments and responsible enough to do so.
The Debt Delinquency Rate is Down
Canadians are still using their credit cards, buying cars and taking out lines of credit, but fewer Canadians are falling behind in their payments. The delinquency rate continues to decline. The average balance owed on non-mortgage debt is slightly less than $20,800.
For the first quarter of this year, the delinquency rate fell to 2.66%. By comparison, the first three months of 2014 had a delinquency rate of 2.72%, while 2013 had an even higher delinquency rate of 2.87%. This is an extremely good trend.
Both Lenders and Borrowers are Doing Better
Part of this decline may be a result of both lenders and borrowers paying closer attention to the importance of managing credit. Lenders are focusing on responsible risk management practices while borrowers are not taking on debt that will put them into trouble later on.
Key Interest Rate Reduction Played a Part
In January, the Bank of Canada decided to lower a key interest rate by 0.75%, in response to the collapse of global oil prices. This had the effect of lowering the interest rates on some mortgages as well as on some lines of credit. Some borrowers used this interest saving to pay down the principal amount.
The Bank of Canada cut a key rate once again in July, lowering it by a further 0.50%. These reductions by the central bank result in similar reductions by commercial lenders.
So overall, Canadians getting better at managing consumer debt and should feel proud of their achievement. It points toward a better and more financially secure future for all Canadians.