As of mid-June, Canadian households were paying more than 2% higher interest on their debts compared to the same time last year, according to a new analysis of Bank of Canada numbers by Better Dwelling.
The weekly effective rate, which measures the average rate that households pay on loans, reached 3.79% on June 14. One of the lowest seen in months, this was a decline of 0.52% from mid-May, and a 2.71% year-over-year drop.
The current effective household borrowing rate saw notable movement, as well. The mid-June measure of this metric was 5.72% lower than the peak reached on the week of March 8th.
“That works out to a 23 bps cut, which is about the impact borrowers would experience with a BoC rate cut. Rate cut fun, without the actual cut,” Better Dwelling explained. “The typical household borrowing rate is now back to the same level it was in August 2018.”
A study released by the Credit Counselling Society earlier this month revealed that the debt-to-income ratio among Canadian households was at an alarming 177.6% during Q1 2019. Total consumer debt (including mortgages) went up to $1.907 trillion – markedly higher than the $1.823 trillion from the year before.
During the same quarter, the average household savings rate declined to 1.1%. These figures illustrated that for the most part, Canadians remain carrying “unprecedented levels” of debt without any buffer against future crises.
“We continue to hear from Canadians, who are concerned on how to make ends meet as their debt continues to grow. We’re finding Canadian consumers reaching out to CCS for assistance are carrying average debt levels over $30,000,” CCS director of education and community awareness Yanchuk Oleksy said.
“This is alarming, as two decades ago, the average was $12,000 of non-mortgage debt.”