New data from Statistics Canada (StatCan) shows that Canadians paid down their non-mortgage debts at the fastest pace in 30 years during the pandemic.
Credit card debt declined by 18 per cent in the year from February 2020 up until the end of January 2021, the data agency said on Monday.
Credit card balances have been growing on average by more than 20 per cent per year since 2000. At the turn of the millennium, Canadians owed a total of $13.2 billion on their credit cards. By February 2020, that figure had ballooned to $90.6 billion. But as of January, it was down to $74 billion, a decline of more than $16 billion. That’s the biggest drop in credit card balances since at least 1999.
“Despite resilient household incomes and the roll-out of government support measures to Canadians, households had few places to spend, and many used the pandemic lockdown as an opportunity to save and pay down existing debt,” StatCan said.
Other forms of debt also declined. The period from May 2020 to May 2021 saw the first annual drop in overall non-mortgage debt in more than three decades.
Most encouragingly off all, people with the lowest credit scores were the most likely to pay down some of that high-interest debt.
People with credit scores of less than 640 have managed to reduce their credit card balance by more than a third. Those on the high end, with scores above 800, now have a balance about one seventh less than it used to be.
“Those with lower scores repaid their debt at a faster rate than those with higher scores throughout the pandemic,” StatCan said. “With the economy looking to reopen fully, many Canadians will likely find themselves carrying lighter non-mortgage debt balances than they had going into the pandemic.”
However, Canadians still owe more than they did before the pandemic largely because of booming demand for mortgages.
A report from Statistics Canada, in June, showed Canadians added $23.6 billion worth of mortgage debt, marking a 1.4% jump from May’s numbers. This is the largest monthly increase ever on record.
Year-over-year, mortgage debt grew 9.2%, a pace that hasn’t been seen since October 2008. And for further context, the report notes that in the first half of 2021, Canadians added $81.6 billion in mortgage debt. For the entire year of 2020, the total amount was $108.6 billion.
Non-mortgage debt, on the other hand, grew by just 0.4% in June to $789.2 billion, with credit card debt and other personal loans the largest drivers.