TORONTO, ON (October 17, 2018) – While total consumer debt including mortgages continues its upward climb to $1.864 trillion in Q2, up from $1.828 trillion in Q1 2018 (+2.0%) and $1.769 trillion a year ago (+5.4%), Equifax® Canada Co.’s Q2 2018 National Consumer Credit Trends Report indicates there is growing concern that delinquency rates will also begin to rise in the coming months.
Higher interest rates, slower economic growth and a dampening effect on new mortgage volume will likely spur an uptick in delinquency rates. The 90 day+ delinquency rate is down 3.1 per cent compared to Q2 2017. It is, however, up slightly from 1.08 per cent in Q1 to 1.10 per cent in Q2 of this year.
“There’s a trifecta of factors in play,” said Bill Johnston, Vice President of Data & Analytics at Equifax Canada. “Consumers will have tighter cash flows as interest rates climb further, which can lead to people not paying off their credit cards in full each month. After a period of sustained economic growth, we’re moving back to a slow and steady pace. And finally, new mortgage volume has been negative over the last three quarters. Add these together and we should begin to see upward movement in delinquencies.”
Delinquency rates have been in retreat for every age group until this most recent quarter when seniors (65+) moved from being down 7.3 per cent a year ago to being up 4 per cent currently. From a regional perspective, delinquency rates remain the highest in Saskatchewan and Newfoundland, respectively at 8.6 per cent and 8.2 per cent.
Average non-mortgage debt was up 3 per cent in the past year, climbing to $23,271 per person. On a debt classification basis, installment loan, mortgage, and auto loan sectors increased modestly to 10.8 per cent, 5.4 per cent and 6.7 per cent year-over-year, respectively.
“There are certainly signs that new credit demand is slowing,” added Johnston. “A hot car market and home renovations are driving installment loans. And, at this point, a slow down or less reliance on lines of credit is a positive step as the market moves through a rising rate phase.”
“Big ticket purchases have installment loans leading credit growth but lines of credit still represent the biggest share of consumer debt,” continues Johnston. “Given that they typically have variable rates, lines will be the first point of impact for higher interest rates and we are already seeing some of that kicking in.”
Debt (excluding mortgages) & Delinquency Rates
Major City Analysis – Debt (excluding mortgages) & Delinquency Rates
Province Analysis - Debt (excluding mortgages) & Delinquency Rates & Bankruptcy Amount
*Data for the Equifax Canada Co. 2018 Q2 National Consumer Credit Trends Report, including scores, is sourced from Equifax Canada, the repository of the majority of credit transactions that occur in Canada. There are over 25 million unique Equifax Canada consumer credit files. Transaction volumes for data are estimated at 105 million per month. Information provided in this report was adjusted to ensure that quarterly data reflects the results as of the last month of each quarter.
Equifax is a global information solutions company that uses unique data, innovative analytics, technology and industry expertise to power organizations and individuals around the world by transforming knowledge into insights that help make more informed business and personal decisions.Headquartered in Atlanta, Ga., Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia Pacific region. It is a member of Standard & Poor's (S&P) 500® Index, and its common stock is traded on the New York Stock Exchange (NYSE) under the symbol EFX. Equifax employs 10,400 employees worldwide.
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