The number of Canadians missing or defaulting on loan payments fell to pre-recession levels during the summer even though the amount of money owed continued to rise, according to a report from Equifax Canada.
Overall non-mortgage debt loads continued to increase during the third quarter, up 1.8 per cent from the same quarter last year, the credit-monitoring firm said in its latest Quarterly Credit Trends Report. However, only 1.22 per cent of debts were unpaid after 90 days or more in the July-September quarter. That's down sharply from 1.37 per cent in the previous quarter and the lowest delinquency rate on record going back to early 2007, before the recession began.
"This ultimately is a good measure of how people are servicing their debt," said Nadim Abdo, vice-president of consulting solutions at Equifax Canada. "Debt is increasing at a slower rate, the actual delinquencies are improving, they're going down. That to me actually shows responsibility of some sort."
The Equifax report suggested Canadian non-mortgage debt totalled $489 billion in the third quarter, up from $484.7 billion in the second quarter.
The biggest increase was a nine per cent jump in auto financing loans as buying activity in the auto market picked up over the past year. Balances on credit cards were actually down, while money owed to banks through term loans and lines of credit grew only moderately.
Abdo pointed out while credit card balances have been falling over the past two years, often lines of credit balances would grow at the same time, suggesting that consumers were transferring credit card debt to other types of lower interest borrowing.
"The drop in credit cards could be a deleverage rather than just transfer-ring them somewhere else," he said. "You could actually argue that people are paying off at least a bit of their credit card debt now."
In addition the credit bureau's credit seeking index - a measure of consumers' appetite to take on new debt - actually sat about nine per cent lower than where it stood in 2007, a further sign there is some control in the market, Abdo said.
"People who are using credit are using their own credit facilities that they have, versus applying for new ones like they were back in the heyday," he said. "To me, that would be a sign of control."
The study's findings could be taken as a moderately encouraging sign that Canadians may finally be heeding repeated warnings from both the Bank of Canada and the Finance Minister about the perils of taking on too much debt.
Still, Statistics Canada's recent revised data shows that household market debt has risen to 163 per cent of disposable income, well above the 152 per cent previously reported using a less focused measure.
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