TORONTO, Sept 4 Canadian consumers took on more
debt in the second quarter as credit card and loan balances
rose, but the delinquency rate continued to decline as indebted
Canadians found ways to pay their bills, a report showed on
Canadian consumers owed C$1.45 trillion ($1.34 trillion) in
the second quarter of 2014, up 1.8 percent from the first
quarter and 7.2 percent compared with a year earlier, credit
monitoring firm Equifax Canada said in a report.
The Bank of Canada has repeatedly warned against rising
consumer debt in Canada, where five years of low interest rates
and a hot housing market have pushed households to rely on
credit to finance both big purchases and day-to-day expenses.
Policymakers fear an eventual rise in interest rates will
crush Canadians who have gotten used to an artificially low debt
burden, sparking both credit card default and a potential
housing crash when mortgage payments become unaffordable.
The central bank highlighted its concern about the
overstretched household sector in remarks on Wednesday even as
it kept the official interest rate at 1 percent.
The average debt held by Canadians, excluding mortgages, is
C$20,759, and the outstanding balances on financial products
increased 1.5 percent compared with the second quarter of 2013,
"Given that the interest rate has been low for a while, and
the indications from the Bank of Canada is that it will probably
not go up significantly, the situation is attractive enough for
consumers to take advantage of," said Regina Malina, senior
director of decision insights at Equifax Canada.
Credit card balances continued to increase, but credit
limits and new card issuance slowed, suggesting the promotion of
credit card issuers is slowing down, Malina said.
But while the level of debt rose, Canadians continued to
make their payments. The average delinquency rate, which
measures bills overdue by 90 days or more, fell to 1.11 percent,
the lowest level since 2008, while consumer bankruptcies fell 5
percent over the last 12 months, Equifax said.
"Consumers should incorporate the fact that eventually
interest rates will go up, and we're hoping when that happens
the delinquency rates stay down," Malina said.
(1 US dollar = 1.0855 Canadian dollar)
(Reporting by Andrea Hopkins; Editing by Jonathan Oatis)