Household debt rises 4.6% to $1.82T in April

Canadian households continue to expand their borrowing habits, racking up outstanding debt of $1.82 trillion by the end of April, according to a report from RBC Economics.

That's a 4.6 per cent increase from April of 2014 and reflects a jump in amount of money people are carrying on their credit cards and lines of credit.

• Household debt is under control in Canada, Fraser Institute says
• High consumer debt reflects 'laissez-faire' attitude to borrowing

Despite a hot housing market that is luring new homeowners in the spring buying season, there was not a marked increase in borrowing for mortgages. Mortgage loans are growing at 5.3 per cent, the same level they've maintained for the past three months.

Mortgage debt continues to represent about 70 per cent of household borrowing.

Non-mortgage loans climbed $15 billion to $532 billion, a three per cent gain. That follows a 2.9 per cent gain in March, but follows a period when consumer debt levels were flat.

Debt has been going for decades

RBC economist Laura Cooper said the 4.6 per cent annual increase in household borrowing is actually below historic trends, which were in the 10 per cent a year range in the past two decades.

Cooper said low interest rates are helping Canadians manage their debt loads. Only about 14 per cent of outstanding debt is high interest rate debt on credit cards.

Instead, many households keep a line of credit as a "precautionary" means of paying bills, she said.

"Less than seven cents of every dollar of income that a Canadian earns goes to interest payments. That's at a historic low. So despite high debt balances, the low interest rates are helping to keep things under control," she said.

Cooper said despite evidence Canadians are handling their high levels of debt, some households might get into difficulty if there is a sudden change in the economy.

"I think the risk lies that households are vulnerable should we see an unforeseen shock, such as significant jobs losses or a rise in interest rates, but neither of those factors are really on the horizon," she said.

The rise in credit card and line of credit debt comes despite an overall reluctance to spend in the first quarter of this year.

Consumer spending slowed

The first quarter of 2015 was marked by slow consumer spending, which many economists blame on winter weather.

In its economic outlook released today, bank economists say they expect consumer spending to pick up in the last half of the year.

With slightly lower gasoline prices and wages starting to accelerate, the bank notes an improvement in saving by Canadian households.

The savings rate recovered to five per cent of income, after three quarters in which it came in below four per cent.

RBC economists say low interest rates are making Canadians debt levels manageable and rates are likely to remain at historic lows.

"While debt levels are high so are asset values, with overall net worth suggesting that the strains on household finances are limited at the current time," the report says.