Consumers scale back
Canadians, it seems, got the memo after all.
Consumers are still borrowing, but clearly pulling in their horns, according to Royal Bank of Canada, which released a study showing that the rate of growth in household credit fell in the third quarter to its slowest since early 2002.
Growth in consumer debt – that takes in everything from mortgages to credit cards and lines of credit – fell in the quarter to 5.6 per cent.
That was down from 6.3 per cent a year earlier, matching the pace of the first quarter of 2002, said RBC economist David Onyett-Jeffries.
This comes after months of warnings from Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty, who has tightened mortgage rules four times to cool things off. The ratio of debt to disposable income is now above 160 per cent.
The message is getting through.
“The easing in credit growth reflected a deceleration in mortgage growth, which fell to a three-year low,” Mr. Onyett-Jeffries said.
“The indications of a pullback in residential real estate activity likely mean that a further slowing in the pace of mortgage growth is in the cards over the coming months, consistent with our expectation that the over all pace of household debt growth will slow through the end of the year and into 2013.”
Canada’s housing market has been cooling rapidly, though, Mr. Onyett-Jeffries said, mortgage levels still “remained buoyant,” rising 7 per cent in September from a year earlier. Growth of other credit slowed, however, for the second consecutive month, rising 2.6 per cent.