Consumer debt down in 1st quarter

Canadians had less consumer debt in the first thee months of 2013 than they did at the end of 2012, but their debt load was still higher than a year ago, a report from the market research firm TransUnion suggests.

Average consumer debt — excluding mortgage — decreased by two per cent in the first quarter of 2013 to $26,935. It was the first quarterly decline since the third quarter of 2011 and the largest one since 2004, the year when TransUnion started tracking consumer debt.

"It should be noted that [debt levels] still remain near all-time high levels," Thomas Higgins, TransUnion's vice-president of analytics and decision services, said in a press release. "It's too soon to tell if we are in a deleveraging trend where balances start dropping consistently over consecutive quarters."

Total consumer debt was 3.48 per cent higher in the first quarter of 2013 than in the first quarter of 2012, but the year-on-year increase was smaller than it had been in the last two quarters of 2012.

British Columbia had the highest debt per person — $38,619 — and was the only province to not show a quarterly decrease in debt. The consumer debt load in that province in the first quarter of 2013 was 3.69 per cent higher than in the fourth quarter of 2012.

In terms of the year-on-year increases, Alberta saw the biggest rise in debt, at 8.08 per cent, and Ontario the smallest at 1.98 per cent.

Lines of credit accounted for most of Canadians' consumer debt, followed by installment loans, auto loans and credit cards. Credit card debt has held steady year-to-year while line of credit debt has risen 2.48 per cent, car debt has increased by 5.27 per cent and installment loans have risen 5.90 per cent.

The average amount owed on credits cards in the first quarter of 2013 was $3,463, compared to $34,951 for lines of credit, which could prove problematic should interest rates rise, said Higgins.

"The average Canadian pays approximately $1,398 in interest per year on their lines of credit. If the prime rate were to increase by 100 basis points, the yearly payments would rise by $350," he said. "An increase of 200 basis points would increase yearly payments by $699, placing more debt burdens on consumers."

Still, the fact that Canadians tend to make their payments on time and have a delinquency rate of only 0.18 per cent on lines of credit is reassuring, Higgins said.

"Lines of credit make up 39.7 per cent of all consumer loan balances, excluding mortgage, thus they provide consumers liquidity, and lenders a viable income stream," he said.