This development accompanied Equifax findings of a 2.9 per cent increase in debt servicing delinquencies among young borrowers under 26 years old, especially in provinces that have been affected the most by the global oil shock. Alberta has seen a 25 per cent rise in delinquency, and 14 per cent in Saskatchewan.
Observers noted that these could be attributed to the rapid growth of debt relative to average income, as well as to sustained rock-bottom interest rates.
“Interest rates have been hovering at a low level for a long time, which has played a significant role in spurring Canadians’ appetite for taking on more debt. Taking on this level of debt may seem manageable at the time, but an unexpected repair, a job loss or a jump in interest rates could really send your finances into a tailspin,” Credit Counselling Society CEO Scott Hannah said in an official statement, as quoted by HuffPost Business Canada
Household debt increased by 1.2 per cent at the end of 2015, while incomes went up only 0.6 per cent. Debt servicing accounted for an average of 13.8 per cent of disposable income, forcing many households to look for alternative avenues—such as extra loans—to pay off these accountabilities.
“It’s tempting to take out more loans and use up credit since interest rates are so low, but when interest rates increase, and they will, it’s going to leave many Canadians in financial difficulty,” Hannah warned.
Latest figures from Statistics Canada revealed that Canada has reached a record-high household debt ratio of 165% in the final quarter of 2015, translating to $1.65 in debt for each $1 in disposable income.