Consumer debt up, defaults down

By Staff | April 24, 2013 | Last updated on April 24, 2013
2 min read

Total consumer debt in Canada has ticked higher year over year, but serious consumer delinquencies are at an all-time low, finds Equifax Canada’s March Consumer Credit Trends Report.

There was moderate growth in total consumer indebtedness, excluding mortgage debt, year-to-date through March 2013 with an increase of 3.9% to $500.8 billion from $497 billion during the same timeframe in 2012.

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The 90-plus day delinquencies for all credit products, excluding mortgages, has decreased by 13.4% from the same time period in 2012 to a moderate 1.2%, an all-time low. The rate was as high as 1.8% during the height of the recession. Consumer bankruptcies are at very similar levels as in 2012.

“First quarter consumer credit conditions in Canada were mixed with outstanding balances rising and late-stage delinquency rates falling relative to a year ago,” says Cristian deRitis, senior director of consumer credit economics at Moody’s Analytics. “The Canadian economy is growing, albeit slowly, and the unemployment rate fell to 7% in the first quarter. Outstanding household debt and available credit rose in the first quarter by 3.9% and 4.4% respectively on a year ago basis, breaking the trend in decelerating growth that began in 2011.”

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Balances are increasing for bank installment loans, lines of credit and auto loans as Canadians continue to shun personal finance and sales finance loans.

“Late-stage delinquency rates continue to show improvement, especially in the energy-rich economies of Edmonton, Calgary, Vancouver and Ottawa,” adds deRitis. “However, rising bankruptcy filings across the country reflect the growing financial strain on Canadian families, particularly in Montreal and Halifax. The largest single threat to consumer balance sheets remains property values.”

With outstanding mortgage balances continuing to grow at a 5% annual rate, households as well as lenders remain vulnerable to a sudden change in the trajectory of home values, he says.

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