Despite rate cuts, auto loans exacerbate Canadians’ debt | Economic office

Recent interest rate cuts ease the financial burden on Canadian borrowers with variable rate loans, but debt still increased in the third quarter of this year.

According to a report from Equifax Canada, consumer debt increased by 4% in one year to reach $2.54 trillion, an amount that excludes mortgage loans. A Canadian must therefore deal with an average debt of $21,810, an increase of $796 from one year to the next.

The credit rating agency says auto loans fueled much of that debt.

Interest rate cuts and lower prices for used vehicles have boosted sales and the issuance of auto loans.

Amounts lent by banks for the purchase of vehicles increased by 2.7% in one year, while other auto loan providers recorded an increase of 12%, according to Equifax.

Debt levels are the highest in the country in Newfoundland and Labrador ($24,771) and Alberta ($24,555). Conversely, Manitobans ($18,086) and Quebecers ($19,027) remain the least indebted.

In Ontario, average debt stood at $22,423 in the third quarter, an increase of 4.4% year-over-year.

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Rising delinquency rate

According to the report, approximately 1.3 million consumers missed a credit payment, an increase of 10.6% year-over-year. In other words, one in 23 borrowers missed at least one payment during the third quarter.

Although the delinquency rate in the country remains high (1.43%), the increase slowed slightly during this period thanks to the easing of monetary policy by the Bank of Canada, points out Kathy Catsiliras of Equifax.

We have felt a slowdown in delinquency since the interest rate cuts in Canada and we are potentially expecting, in about two weeks, a further reduction in the key rate.says portfolio manager Francis Gingras Roy.

People who were already in debt, who had a variable rate loan, this has a direct impact on their portfolio, on the money they have left for their expenseshe said.