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Consumer Attitudes Towards Debt - Canada - July 2015

“The entrance of marketplace lenders in Canada offers another borrowing outlet for consumers who are carrying credit card debt or using expensive payday loan services.”
– Sanjay Sharma, Senior Financial Services Analyst

This reports looks at the following areas:

  • Are Canadians carrying too much debt?
  • Impact of marketplace lenders on the consumer lending business in Canada
  • A third of young Canadians are stressed about money and looking for help
  • Are British Columbians more likely to be impacted by potential interest rate hikes?

Almost every day Canadians see headlines proclaiming that household debt levels have reached record highs. But there are counter arguments from some experts that Canadians can handle this increased borrowing based on the macroeconomic fundamentals of the economy and the financial strength of Canadian households. Some of the steady rise in household debt in Canada could also be a generational shift in attitudes, as credit becomes easier to access. Also, often times, debt is used for many productive purposes such as education, starting a business or buying a home.

The consumer lending business has thrived under the prolonged low interest rate environment and Canada’s strong economic fundamentals.
The continued strength of the housing market in most parts of the country has ensured strong profits for financial institutions. Canada has one of the highest rates of home ownership in the world and around a third of Canadians have an outstanding mortgage. In addition to mortgages, Canadians continue to borrow money through lines of credit, credit cards and specific product loans, such as auto or Registered Retirement Savings Plan (RRSP) loans. The lending market is dominated by the major banks but smaller banks, credit unions and specialised lending companies also continue to thrive. New entrants such as online marketplace lenders are aiming to gain traction in this market.

This report covers consumer behaviour and attitudes related to consumer borrowing (credit cards, mortgages, loans and lines of credit). We explore issues such as lending product ownership rates, amount of debt owed, usage and interest in debt management tools, attitudes towards personal finances and general attitudes towards debt and borrowing.

 

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Table of contents

  1. Introduction

      • Methodology
        • Abbreviations
          • Regional classifications
            • Excluded
            • Executive Summary

                • The market
                  • Overall negative impact of lower oil prices on the Canadian economy
                    • Outlook on the real estate and housing market
                      • Household debt in Canada
                        • Population count and growth in Canada
                          • Companies and innovations
                            • The consumer
                              • Around three in five Canadians have outstanding debt
                                • Figure 1: Ownership of debt products, April 2015
                              • More than a third of those with debt owe more than $100,000
                                • Figure 2: Amount of outstanding debt held, April 2015
                              • Majority of Canadians expect to be debt-free and not overly dependent on government old age security at retirement
                                • Figure 3: Attitudes related to personal finances, April 2015
                              • British Columbians feel most vulnerable to interest rate hikes
                                • Figure 4: Attitudes related to debt, April 2015
                              • What we think
                              • Issues and Insights

                                  • Are Canadians carrying too much debt?
                                    • The facts
                                      • The implications
                                        • Impact of marketplace lenders on the consumer lending business in Canada
                                          • The facts
                                            • The implications
                                              • A third of young Canadians are stressed about money and looking for help
                                                • The facts
                                                  • The implications
                                                    • Are British Columbians more likely to be impacted by potential interest rate hikes?
                                                      • The facts
                                                        • The implications
                                                        • Trend Application

                                                            • Trend: Click and Connect
                                                              • Trend: Guiding Choice
                                                                • Trend: Totophobia
                                                                • Market Factors

                                                                  • Key points
                                                                    • Economic overview
                                                                      • Overall negative impact of lower oil prices on the Canadian economy
                                                                        • Figure 5: Canada’s GDP, by quarter, Q4 2008-Q4 2014
                                                                        • Figure 6: Household disposable incomes and savings in Canada, by quarter, Q4 2008-Q4 2014
                                                                        • Figure 7: Canada’s unemployment rate, by gender, 2008-15
                                                                      • Impact of interest rates, inflation and exchange rates
                                                                        • Figure 8: Inflation rates in Canada (%), 2004-14
                                                                      • Bank of Canada keeps interest rate steady at 0.75%
                                                                        • Figure 9: Canada bank rate, 2005-15
                                                                      • Outlook on the real estate and housing market
                                                                        • Consumer Confidence
                                                                          • Figure 10: Consumer Confidence Index, monthly, January 2008-February 2015
                                                                        • Household debt in Canada
                                                                          • Demographic overview
                                                                            • Population count and growth in Canada
                                                                              • Figure 11: Share of population of Canada, by territory/province, 2015 (projected)
                                                                            • Minority groups account for less than 20% of Canada’s population
                                                                              • Figure 12: Estimated population of Canada, by ethnicity, 2011
                                                                            • Canada’s population is expected to age in the coming years
                                                                              • Figure 13: Population aged 65 years and over in Canada, historical and projected (% of total), 1971-2061
                                                                              • Figure 14: Projected trends in the age structure of the Canada population, 2014-19
                                                                          • Strengths and Weaknesses

                                                                            • Strengths
                                                                              • Weaknesses
                                                                              • Companies and Innovations

                                                                                • Key points
                                                                                  • OnDeck Peer-To-Peer Lending Expands To Canada
                                                                                    • Borrowell set to become second member of Canadian marketplace lenders’club
                                                                                      • Earnest uses “merit-based” credit scoring factors
                                                                                        • UK – Door-to-door consumer lending
                                                                                          • Lending Club partners with BancAlliance, a national consortium (US) of 200 community banks
                                                                                            • Colombia – Credit fairs reach the masses
                                                                                              • Use of personal data to make lending decisions
                                                                                                • PayPal expands into the lending space
                                                                                                  • Goldman Sachs entering the online lending market
                                                                                                    • Float Money (US)
                                                                                                      • Facebook enters the money transfer market
                                                                                                        • Some popular apps for debt management
                                                                                                        • The Consumer – Ownership of Debt Products

                                                                                                          • Key points
                                                                                                            • Around three in five Canadians have outstanding debt
                                                                                                              • Figure 15: Ownership of debt products, April 2015
                                                                                                            • Debt ownership peaks among 25-44s
                                                                                                              • Figure 16: Ownership of debt products, by age, April 2015
                                                                                                            • About a third have two or more products with outstanding debt
                                                                                                              • Figure 17: Repertoire of ownership of debt products, April 2015
                                                                                                          • The Consumer – Amount of Debt Held

                                                                                                            • Key points
                                                                                                              • More than a third of those with debt owe more than $100,000
                                                                                                                • Figure 18: Amount of outstanding debt held, April 2015
                                                                                                                • Figure 19: Amount of outstanding debt held, by household income, April 2015
                                                                                                            • The Consumer – Attitudes Related to Personal Finances

                                                                                                              • Key points
                                                                                                                • Summary of attitudes towards personal finances
                                                                                                                  • Figure 20: Attitudes related to personal finances, April 2015
                                                                                                                • Majority of Canadians expect to be debt-free and not overly dependent on government old age security at retirement
                                                                                                                  • Figure 21: Attitudes related to retirement, April 2015
                                                                                                                • Higher income earners more likely to label debt as “good” and “bad”
                                                                                                                  • Figure 22: Attitudes related to spending habits, April 2015
                                                                                                                • About half of consumers with debt have no problem meeting their debt repayments
                                                                                                                  • Figure 23: Attitudes related to comfort with debt payments, April 2015
                                                                                                              • The Consumer – Interest in Debt Management Tools

                                                                                                                • Key points
                                                                                                                  • Usage of debt management tools is low
                                                                                                                    • Figure 24: Interest in debt management tools, April 2015
                                                                                                                  • Younger Canadians more likely to be interested in debt management tools
                                                                                                                    • Figure 25: Interest in debt management tools (have not used but would be interested in using), April 2015
                                                                                                                • The Consumer – Attitudes towards Debt

                                                                                                                  • Key points
                                                                                                                    • Summary of attitudes towards debt
                                                                                                                      • Figure 26: Attitudes related to debt, April 2015
                                                                                                                    • British Columbians feel most vulnerable to interest rate hikes
                                                                                                                      • Figure 27: Attitudes related to debt levels, April 2015
                                                                                                                    • Young Canadians more likely to feel that debt causes a significant amount of stress in their life
                                                                                                                      • Figure 28: Attitudes related to debt and stress, April 2015
                                                                                                                    • Canadians have somewhat contradictory views on holding debt
                                                                                                                      • Figure 29: Attitudes related to risk tolerance, April 2015
                                                                                                                  • The Consumer – Chinese Canadians and Debt

                                                                                                                    • Key points
                                                                                                                      • Chinese Canadians more likely to have mortgages and less likely to have auto loans
                                                                                                                        • Figure 30: Ownership of debt products, Chinese Canadians versus. Overall population, April 2015
                                                                                                                      • Chinese Canadians are confident about their financial future and are comfortable with their debt levels
                                                                                                                        • Figure 31: Attitudes towards personal finances, Chinese Canadians vs. Overall population, April 2015
                                                                                                                    • The Consumer – Target Groups

                                                                                                                      • Key points
                                                                                                                        • Four target groups
                                                                                                                          • Figure 32: Target groups, April 2015
                                                                                                                        • Stressed (29%)
                                                                                                                          • Cautious (28%)
                                                                                                                            • Credit Confident (22%)
                                                                                                                              • Vulnerable (21%)

                                                                                                                              Companies Covered

                                                                                                                              To learn more about the companies covered in this report please contact us.

                                                                                                                              Consumer Attitudes Towards Debt - Canada - July 2015

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