Low interest rates, strong labor market behind rising consumer loans


Consumers are in the mood to spend, encouraged by low interest rates and a strong job market.

Non-mortgage loans increased 38% in June.
Photo: 123RF

Data from the credit bureau Centrix shows that non-mortgage loans, which include credit cards, personal loans and buy-it-now and late-payment programs, reached over $ 600 million in June, an increase by 38% compared to May.

Centrix chief executive Keith McLaughlin said most of the spending was on high-priced luxury items, such as high-end vehicles.

“When people buy luxury items such as motor vehicles, it tends to reflect confidence in the market, the confidence that they have jobs that they are secure in their jobs.

“When loans go down, it shows that there is some uncertainty in future income,” he said.

While interest rates have remained low, demand for credit cards was stable and well below pre-pandemic levels, while new mortgage applications have cooled over the past two months, but not as much as expected given the government’s efforts to cool the housing market. .

“I think new home loans have declined slightly, which reflects what is happening in the market,” McLaughlin said.

There had also been a sharp increase in personal loan arrears, rising 0.6 percent to the highest level since March 2020.

The number of accounts declared overdue rose 1.2%, although the rate remains at historically low levels.

The mortgage default rate fell in May for the second month in a row, with nearly 2% of 16,400 overdue accounts.

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