Canadian debt loads grew at their fastest pace in two years during the summer, according to a report released Wednesday - an alarming rate given that officials continue to warn consumers that household spending is out of control.
Credit reporting agency TransUnion's latest quarterly analysis of Canadian credit trends found average consumer non-mortgage debt jumped 4.6 per cent year-over-year in the third quarter to an average of $26,768.
Measured on a quarterly basis, debt grew 2.1 per cent in the summer from the second quarter of this year.
"It's almost been two years and it's the largest year-over-year increase we've had and I think it's the largest quarterly increase we've had during that time period as well," said Thomas Higgins, TransUnion's vice-president of analytics and decision services.
Higgins said the increase stands in stark contrast to encouraging signs from relatively stagnant debt growth in the prior three quarters.
He also points out that in the past five years, debt loads have increased 400 per cent more than the rate of inflation - with inflation as measured by the Consumer Price Index up nine per cent and consumer debt jumping more than 37 per cent.
"Debt's outpacing us and continues to outpace us, so at some point in time there's going to be a reconciliation," Higgins said.
An 11 per cent uptick year-over-year in auto loans to an average of $19,228 was the main driver of the growth in overall debt as consumers are once again shopping for cars, a big-ticket purchase largely put aside during the recession.
Canadian instalment loan borrower debt grew 2.3 per cent from the third-quarter of last year to an average of $22,849.
Higgins said he believes the reason consumers continue to ramp up their debt loads - aside from the protracted period of record low interest rates - is that scary economic headlines from around the world have started to dissipate, with less bad news coming out of Europe, the U.S. posting growth and Canada reporting a healthy jobs market.
On a more positive note, the report said Canadian average credit card debt - which carries the highest carrying costs - was down one per cent year-over-year, though it was up half a per cent from the previous quarter and now hovers at an average of $3,573.
Borrowing on lines of credit fell 0.2 per cent year-over year, but grew nearly one per cent since the second quarter of the year and sits at an average of $34,050.
Perhaps the most encouraging news in the report was that delinquency levels - those who are late or default on a loan- continue to remain low across all categories.
