Canadians’ debt loads have grown 21 per cent in the past year, and more consumers are running into the red, according to Royal Bank’s debt poll.
Just 24 per cent of Canadians say they are debt-free, compared to 26 per cent in 2012. And those who are in debt have increased their non-mortgage burdens to $15,920 from $13,141 in the same time frame, RBC’s survey found. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.
Canadians are taking advantage of the era of super low interest rates to finance more borrowing, a move the government has vocally discouraged.
Debt loads have skyrocketed in the years since the 2008-2009 recession, after the government dropped borrowing rates to near zero in order to stimulate consumer activity, the housing market and the economy.
The RBC poll found that the number of Canadians who are anxious about their debt levels has risen four percentage points in the past year, to 38 per cent. Still, the same number said they are comfortable with the amount they owe.
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Which Canadians Say They'll Never Be Debt Free
The household debt-to-disposable income ratio is at an all-time high, around 163 per cent. That means for every dollar Canadians earn, they owe $1.63.
The Bank of Canada and Finance Minister Jim Flaherty have repeatedly warned Canadians about digging themselves into a financial hole while borrowing is cheap. They fear consumers may be unable to climb out of the debt load when interest rates inevitably rise.
However, in its latest monetary policy report, Canada’s central bank slashed its economic outlook for Canada for the next three years and indicated that a troubled global economy may compel it to maintain interest rates at the current near record low rate of one per cent, where it has been since 2010.
The announcement left many observers wondering whether the prolonged low interest rate environment will increase the likelihood of a housing correction or hard landing for borrowers when rates finally rise.
The RBC poll was conducted by Ipsos Reid from Aug. 22 to 27 through an online sample of 2,108 Canadians with an estimated margin of error of plus or minus two per cent, 19 times out of 20.