Canadian consumers continue to rack up near-record debt levels although they managed to lop a little off what they owe in the latest quarter.
The average Canadian's non-mortgage debt – which includes credit cards, car loans, instalment loans and lines of credit – reached $26,935 in the first quarter, according to the latest report by credit bureau TransUnion .
That's up $906, or 3.48 per cent, from the $26,029 in the same quarter last year. The record high level of $27,485 was reached in the fourth quarter of 2012.
The good news is that – compared with the fourth quarter of last year – consumer debt in the first quarter fell 2 per cent to $26,935, the first quarterly decline since the third quarter of 2011 and the biggest one since TransUnion started tracking the variable in 2004.
Another encouraging sign is that the year-over-year increase of 3.48 per cent is lower than the increases of the previous two quarters: 5.87 per cent in the fourth quarter of 2012 and 4.60 per cent in the third quarter of last year.
Those numbers suggest that Canadians are taking on more debt but at a slower pace than before.
"Consumer debt levels are typically softer in the first quarter of the year as many people pay off charges made during the holiday season," said Thomas Higgins, TransUnion's vice president of analytics and decision services.
The first-quarter decline is a significant one because it's the largest since 2004, he said in a news release Tuesday.
"It's too soon to tell if we are in a deleveraging trend where balances start dropping consistently over consecutive quarters. A similar decrease in balances both on a quarterly and yearly basis occurred in 2011, but was soon followed by rapid balance increases in 2012."
Meanwhile, delinquency levels remained low in all credit categories, noticeably in motor vehicle loans, according to the report.
British Columbia was the only province not to experience a quarter-over-quarter decrease in consumer debt; it was up 3.69 per cent.
B.C. also replaced Alberta in the first quarter as the province with the highest debt per person: $38,619 versus $36,223.
Lines of credit in the first quarter, which are usually tied to variable interest rates, represented 39.7 per cent of all consumer loan balances, excluding mortgages.
Interest rate hikes could become problematic for some consumers, said Mr. Higgins.
"The average Canadian pays approximately $1,398 in interest per year on their lines of credit. If the prime rate were to increase by 100 basis points, the yearly payments would rise by $350. An increase of 200 basis points would increase yearly payments by $699, placing more debt burdens on consumers."
Canadian lines of credit debt rose 2.48 per cent from a year ago, with a modest decrease of 0.84 per cent on a quarterly basis.
Continued low delinquency levels in lines of credit is a positive sign for both lenders and borrowers, said Mr. Higgins.