Canadian households have returned to their free-spending ways and seniors have joined the party lately by borrowing to finance their post-retirement lifestyles, a new report says.
The report from Equifax Canada shows that despite recent efforts by policy-makers to clamp down on borrowing, total consumer debt in Canada rose $77 billion, or 6.1%, in the second quarter of 2013 from last year, and by 6.5% among those 65 and over.
The increase in debt among seniors was the biggest year-over-year of all age groups.
Jeffrey Schwartz of Consolidated Credit Counseling Services of Canada says the finding on seniors' debt is in line with other reports that show bankruptcies among retirees is on the rise.
"That's what scary about this," he said. "Seniors are carrying more debt into retirement. They are trying to maintain a lifestyle they had pre-retirement but on post-retirement income, and if income has dropped, they are increasing their debt to cover off their spending. It's a very dangerous strategy."
He added another possible cause is that seniors are supporting their grown children in greater numbers.
In a separate analysis from the TD Bank also released Monday, economist Leslie Preston noted that although savings rates have risen in recent months, it will take a long time for Canadians, including seniors, to pay off their mountains of debt.
"The moderate jump in savings is unlikely to address the broader challenge of insufficient retirement savings for a large slice of Canadian households," she said.
Overall, the Equifax data suggested most of the new debt came from an increase in mortgage credit, up 7.4%, and in auto loan balances, which increased 8.6% over the past year.
Other data from Statistics Canada and the Bank of Canada have tended to show a decrease in credit accumulation, although the last release was for the first quarter of 2013, which found the debt-to-income ratio falling to 161.8% from 162.6%.
However, the pace on home purchases picked up during the spring.
Despite the increase in debt, Equifax also found that delinquency rates fell over the past year to 1.19% in the second quarter of this year, one of the lowest values on record.
The fraction of mortgage loans that were 90 or more days delinquent slid to 0.27% from 0.33% a year earlier.
