While Canadians’ mortgage debt grew out of the ordinary during the pandemic, other types of debt – other than mortgage debt – recorded record declines during the same period, marked by strong repayment capacity. .
This is one of the main findings of a Statistics Canada study released on Monday.
“From the start of the pandemic to January 2021, mortgage debt showed unprecedented growth of $ 99.6 billion, which is attributable to rising house prices – particularly single-family homes – across the country, can we? read in a press release presenting the study. Conversely, non-mortgage debt recorded a record decline of $ 20.6 billion over the same period, mainly due to the $ 16.6 billion decline in credit card debt. ”
“A year after the start of the pandemic, Canadian household debt was about $ 2.5 trillion, two-thirds of which was mortgage debt, and one-third was other types of debt,” such as loans for the purchase of a car or for home improvement, credit card refunds or any other financial obligation.
The phenomenon is explained by the fact that Canadians saw their disposable income increase during the pandemic, “particularly because of the limited spending opportunities during periods of lockdown and the financial support provided by governments (for example, the PKU or improvement of the employment insurance plan) to compensate for lost wages, ”the federal agency pointed out.
According to his analysis, “the level of overall annual savings in 2020 was almost at the same level as the previous seven years combined.”
This has resulted in the repayment, in record proportions, of costly non-mortgage debt.
“For example, the outstanding credit card balance fell from $ 90.6 billion, just before the pandemic in February 2020, to $ 74 billion in January 2021, which represents a decrease of 18.3% less year, Statistics Canada notes in its study. By way of comparison, in the 20 years leading up to the pandemic, overdue credit card balances grew by an average of 20.7% per year. ”
Another finding in the analysis, going in the same direction: “A decline in non-mortgage debt was observed for the first time in nearly three decades in May 2020.” “Growth remained negative throughout 2020 through 2021, with March 2021 balances still being $ 11.5 billion below their pre-pandemic level.”
In addition, “the largest reductions in debt levels were seen among Canadians with the lowest credit scores,” the study said.
“Disposable income and the savings rate remained high through the end of 2020 and into 2021, as continued support from all levels of government, through direct transfers and grants to businesses, continued to support household incomes. ”
However, Statistics Canada’s analysis states that there has been a recovery in new borrowings, which have even peaked.
“While the more recent actions by provincial governments in response to COVID-19 have been diverse, the general easing of restrictions in 2021 has resulted in a sharp increase in new non-mortgage borrowing, with borrowing in April reaching a low. record unmatched since 2010, when this data began to be collected. While borrowing activity hit its lowest level during the pandemic in March and April 2020, new borrowing experienced exceptional year-over-year growth in March and April 2021. “
This Statistics Canada study on the non-mortgage debt of Canadians released Monday was preceded by a similar study last February on their mortgage debt.
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