For the first time in seven years, Canadian GDP has outpaced credit growth, according to a CIBC World Markets report released today.After an uncomfortable increase due to the recession, debt-to-service ratios among Canadians are now flattening. Mortgages in Canada are expanding at a rate of 0.6 percent month over month, the slowest growth since 2003.
Lines of credit are growing at an even slower rate; rises in credit card balances are soft and direct loans have flatlined.
A leading national news site quotes the report as saying that Canadians today spend 7.45 percent of their disposable incomes on interest payments to service debt – the lowest since mid-2006.
These findings suggest that the shock of the 2008 meteoric slide in markets, employment and investment savings is still reverberating with Canadians, but our economy is on the upswing.
The lesson in all of this can be gleaned from the report’s author, CIBC economist Benjamin Tal: financing purchases isn’t a bad thing as long as the value of your assets – such as real estate and other capital – is greater than your credit (your net worth). Tal points out that Canadians’ assets are now growing at a faster rate than debt, which is a good sign that the economy is moving in the right direction.
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