A new Equifax report suggests Canadians began making real strides in cutting household debt before the new mortgage rules came into effect, raising concerns the government was too quick off the mark.
Growth in consumer debt fell 30 per cent in the second quarter, compared to a year earlier, reflecting the single biggest drop since before the recession.
“For the last couple of years we have seen almost double digit growth in some cases, it slowed down a bit last year, but we have never seen it slow down as much as we have (now),” said Nadim Abdo, VP of analytical services for Equifax Canada.
In real terms, consumer indebtedness – not taking into account mortgage debt -- climbed 3.1 per cent year-over-year in the second quarter. That’s down from the 4.4 per cent increase logged a year earlier, according to the Equifax quarterly trend report.
Economists are calling that improved financial footing the most conclusive indication to date that Canadians are getting the message about the dangers of household debt levels, now averaging 152 per cent of income.
The numbers also draw attention to tighter mortgage rules taking effect last week and meant to bring about the kind of consumer restraint already in the works.
There's also concerns those rules have further cooled the housing market.
“Even before the new mortgage rules kicked in, all signs suggest that the Canadian housing market was already cooling," BMO economist Douglas Porter told reporters. "The new rules will simply pull hard on a closing door.”
June CREA numbers suggest that door has already been pulled tight.
In total, there were some 4.4 per cent fewer homes sold last month compared to the year-ago period, according to the Canadian Real Estate Association’s latest numbers.
In terms of prices, the average seller of a home in June 2012 received $369,339, down 0.8 per cent from the same month in 2011.
The double whammy marks an about-face for a national housing market that the federal government, among other key stakeholders, viewed as primed for a major correction if intervention wasn't initiated.
The June numbers do not reflect that intervention, and the slide raises questions about whether the changes were in fact necessary.
"Homebuyers didn’t rush their purchases before the most recently announced changes to mortgage regulations came into effect," CREA's chief economist Gregory Klump said.