A new report identifying a spike in consumer loans may be the strongest indication refinance rules are forcing Canadians into higher-interest borrowing.
Fourth quarter 2012 saw a 3.2 per cent rise in non-mortgage loans compared to the year-ago period, according to Equifax’s latest National Credits Trends study, released Thursday. That’s over and above the near-2 per cent climb recorded between July and September – again a year-over-year comparison.
That new debt came in the form of bank loans, lines of credit, car leases and credit cards, says the report. Those loans generally carry interest rates as much as 1,800 basis points higher than mortgage debt.
The growth starting in Q3 coincides with the introduction of the government’s latest round of mortgage rule changes, which reduced the ceiling on refinances to 80 per cent loan-to-value from the then-85 per cent.
Brokers have argued the move as detrimental to borrowers looking to manage debt without resorting to the kind of high-interest credit cards that may have contributed to their financial woes in the first place.
Those mortgage professionals are likely to find support for their conclusions in this latest Equifax report.
Still the study does offer some good news for an economy still grappling to contain rising household debt levels – ostensibly, the reason the government introduced those more stringent mortgage rules in July.
The percentage of unpaid non-mortgage debt in arrears, or more than 90 days past due, stood at 1.19 per cent in the fourth quarter, down slightly from 1.22 per cent in Q3.