• Canadians Debt Burden Rises But Delinquency Rate is at Record Lows

    Majority of Canadian consumers continue to increase their debt burdens despite recent efforts from regulators to tighten lending standards, latest data from Equifax Canada showed. However, Equifax Canada’s Q2 2013 National Consumer Credit Trends Report also found that the National 90 day-plus delinquency rate decreased over the past three years to a record low of 1.19 percent.

    The study said that total debt rose by nearly $77 billion, or 6.1 percent, from last year’s level driven by an 8.6 percent increase in auto loan balances and a 7.4 percent increase in outstanding mortgage debt.

    Cristian deRitis, Senior Director of Consumer Credit Economics at Moody’s Analytics, commented on the Equifax report by adding that “the increased demand for credit outside of mortgages is positive for the economy in the short-term, but could limit the ability of over-extended consumers to react to any financial bumps in the road in the future.”

    The Equifax Report also revealed that average debt for consumers aged 65 and over shows the greatest year-over-year increase in all age groups at 6.5 percent.

    Debt Payment: A Bother for Retirees
    Henrietta Ross, CEO, Canadian Association of Credit Counselling Services, noted that “the traditional golden years that retirees anticipated have not become a reality as debt loads rise for those over 65. With reduced incomes, often coupled with increased expenses, these individuals are accumulating more debt to boost income through credit so that they can continue to enjoy a pre-retirement lifestyle that they may no longer be able to afford. They also may be accumulating debt in an effort to help their own grown children or their own parents who are struggling financially,” she added on this alarming trend.

    Serious delinquency rates are stable across lending products as well as provinces. Toronto has the highest delinquency rate among major Metropolitan Areas at 1.56 per cent of non-mortgage balances but has continuously improved since hitting a peak of 2.53 percent in 2010. The fraction of mortgage loans that were 90 or more days delinquent fell to 0.27 percent in the second quarter from 0.33 percent a year ago.

    “Stable home prices and improvements in the labour market should continue to support the market in the future, while the outlook for consumer credit remains positive,” advised deRitis. “A sudden rise in interest rates or deterioration in fundamentals in key export markets are risks to this forecast however.”

    Debt with More Fiscal Responsibility
    Regina Malina, Director, Modeling & Analytics, Equifax Canada, commented that “as the fears of another recession slowly subside, consumers continue to accumulate high levels of debt but with more fiscal responsibility.”

    The mortgage portfolio highlights include:

    • The 90 day plus delinquency rate for mortgages shows a 19.2 per cent decrease from the same period last year, which could be the result of the tighter mortgage lending rules introduced in July 2012.
    • Mortgage portfolios are growing at a robust pace, an increase of 7.4 per cent over the same period last year.
    • Average Mortgage balances are showing small but steady increases: $162,985 vs. $168,387 (Q2/12 vs. Q2/13 respectively).

    Article Created: 2013-10-22
    Article Updated: 2013-11-13

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