Most Canadians, especially the elderly, are seemingly much more aware of their debt obligations and a good number are now making every effort to ensure that their debts are paid in good time to avoid the inevitable disappointments that result from unsettled debts.
According to a poll initiated by the Canadian Imperial Bank of Commerce (CIBC), almost half of the 72 per cent of Canadians who bear some form of debt made considerable payments in 2011. The report shows that many Canadians are making the right decision to pay back their debt. Others are also seeking professional debt help such as debt settlement and credit counselling.
According to the study, close to two thirds of the payments were for credit card debt, followed in second place by lines of credit at 42 per cent and mortgages at 22 per cent.
Debt in Canada is Steadily Increasing
Although many Canadians are making important steps to repay their debt, this does not imply that the overall debt in the country is decreasing. In fact, the amount of debt in Canada is increasing slowly. Take the mortgage rate for instance. By March 2012, the rate stood at 6.3 per cent year over year in contrast to a 7.3 per cent average recorded for the previous two years.
And for the first time in 10 years, consumer debt is increasing much more slowly than it is doing in the United States.
A strong element that comes out of the report is the realization that a great percentage of Canadians have now realized that too much debt is not good in the absence of candid repayment plans and options. Most Canadians have no doubt seen the unpleasant adjustments the Americans have had to go through, and no Canadian would wish to have to go through the same experience.
Analysts have observed that these trends put the Bank of Canada at ease because it is under no pressure to increase the interest rates.
From a purely economic point of view, debt repayment does not exactly contribute directly to immediate economic growth particularly the GDP. But the good side is that debt repayment will eventually free up the borrowing tendency which creates a perfect setting for a stable future of the country.
Another interesting trend that emerges from the CIBC report is the indication that only 4 per cent of the loans being paid back are over 90 days past the due dates. The sub-prime mortgage segment on the other hand is accounting for less than 3 per cent of all outstanding mortgages across Canada, in sharp contrast to the 14 per cent that was witnessed in the United States just before the financial melt-down.
The report revealed that the elderly Canadians bear the least debt, with those above the age of 65 holding approximately $66,000 worth of debt, compared to $129,200 which is the amount that was found to be held by Canadians aged below 45, at the time when the CIBC poll was conducted.