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The number of Canadians missing or defaulting on loan payments fell to pre-recession levels during the summer even though the amount of money owed continued to rise, according to a report from Equifax Canada.
Overall non-mortgage debt loads continued to increase during the third quarter, up 1.8 per cent from the same quarter of last year, the credit-monitoring firm said in its latest Quarterly Credit Trends Report released Tuesday. However, only 1.22 per cent of debts were unpaid after 90 days or more in the July-September quarter.
That's down sharply from 1.37 per cent in the previous quarter and the lowest delinquency rate on record going back to early 2007, before the recession began.
"This ultimately is a good measure of how people are servicing their debt," said Nadim Abdo, vice-president of consulting solutions at Equifax Canada. "Debt is increasing at a slower rate, the actual delinquencies are improving, they're going down. That to me actually shows responsibility of some sort."
The Equifax report suggested Canadian non-mortgage debt totalled $489 billion in the third quarter, up from $484.7 billion in the second quarter.
The biggest increase was a nine per cent jump in auto financing loans as buying activity in the Canadian auto market picked up over the past year.
Balances on credit cards were actually down, while money owed to banks through term loans and lines of credit grew only moderately.
Mr. Abdo pointed out that while credit card balances have been falling over the past two years, often lines of credit balances would grow at the same time, suggesting that consumers were transferring credit card debt to other types of lower interest borrowing.
"The drop in credit cards could be a deleverage rather than just transferring them somewhere else," he said.
"You could actually argue that people are paying off at least a bit of their credit card debt now."
In addition the credit bureau's credit seeking index — a measure of consumers' appetite to take on new debt — actually sat about nine per cent lower than where it stood in 2007, a further sign there is some control in the market, Mr. Abdo said.
"People who are using credit are using their own credit facilities that they have, versus applying for new ones (like) they were back in the heyday," he said.
"To me, that would be a sign of control."
The study's findings could be taken as a moderately encouraging sign that Canadians may finally be heeding repeated warnings from both Bank of Canada governor Mark Carney and Finance Minister Jim Flaherty about the perils of taking on too much debt.
Still, Statistics Canada's recently released revised data shows that household market debt has risen to 163 per cent of disposable income, well above the 152 per cent previously reported using a less focused measure.
A report earlier this year by Moody's Analytics said with Canadians so deep in debt, it would be extremely difficult for domestic spending to pick up slack in the economy if things started to go downhill.
That could result in a serious downward spiral in employment levels, household spending and the quantity and quality of credit outstanding, it said.
During the most recent quarter, consumer credit conditions in Canada remained "stable" and in line with the firm's projections for GDP growth and unemployment, noted Cristian deRitis, senior director of consumer credit economics at Moody's.
"Balances are declining for credit cards, personal finance and sales finance loans as borrowers turn to bank instalment loans and lines of credit to meet their needs," he said.
"Auto financing continues to experience rapid expansion as Canadians flock to dealer lots and showrooms."
Mr. Abdo said that based on the current Canadian economic climate, he expects the trend of declining debt accumulation to continue — barring some large unforeseen shock from the global economy.