Canadians’ borrowing is expanding at a pace not seen in more than a decade, while consumer bankruptcies continue to trend downwards, says CIBC in its latest Household Credit Analysis report.

Household credit rose by 7.6% during the year ending October 2002, the fastest pace of growth in 11 years.

Also, for the first time since mid-2001 consumer credit is rising faster than mortgage credit. Mortgage debt rose by 7.6% during the year ending October 2002, a significant acceleration from the 6% growth observed earlier in 2002. During the same period, consumer debt expanded by more than 8%.

More Canadians are clearly choosing to take advantage of personal lines of credit, which are currently expanding at a dazzling pace of 26% on a year over year basis. The ongoing appreciation in home prices has led to a significant jump in the use of home equity loans, which are rising by 25% on a year over year basis.

Growth in credit card debt is also rising by over 13% year over year.

“The current environment of very low interest rates, healthy consumer confidence and the relatively slow pace of income growth is a sure recipe for increased borrowing,” said Benjamin Tal, CIBC World Markets senior economist.

“We believe that the pace of household credit growth is sustainable given our prediction of relatively stable interest rates,” adds Tal. “However, by the second half of this year, we should see some moderation in the pace of growth of household credit — largely due to some softening in the mortgage market as activity in the housing market as a whole slows in 2003. Overall we expect household credit growth to slow to around 6%.”

Even with the very strong growth in borrowing, personal bankruptcies are trending downward, falling by 1.5% in the first eleven months of 2002 compared to the same period last year. The main improvement is in Quebec, with Ontario still seeing rising bankruptcies — reflecting the sensitivity of the province to developments south of the border.

And, despite the very strong growth in mortgage debt, the number of mortgages that are in arrears has been falling, reflecting the strong labour market and very low mortgage rates.

A full copy of the CIBC Household Credit Analysis report can be viewed at: http://research.cibcwm.com/economic_public/download/hca-01232003-internet.pdf