In a sign Canada’s interest policies are starting to take a toll — as they were designed to — delinquency rates on home mortgages and equity lines are on the rise according to credit monitoring agency Equifax..The kind of debt that affects credit scores..The 30-day delinquency rate on non-mortgage debt — credit cards and car loans — was up 26.3% in the second quarter compared to the same period of last year, according to Equifax Canada’s Q2 Consumer Credit Trends and Economic Insights report..Mortgage delinquencies were 32.6% above year-ago levels, but remain 36% lower than pre-pandemic levels in 2019..No surprise, the provinces with the highest mortgage default rates also have the highest house prices: Ontario and 86.9% and BC at 33.9%..Likewise, missed payments on home equity lines are up 71% compared to last year and are just 12.8% below 2019 levels. .Minimum monthly payments for credit card and unsecured lines of credit increased by 11.7% and 18.3%, respectively. Equifax added HELOC holders have seen their payments rise by more than $200 a month on average..Those jibed with rival TransUnion's own report, which said the average line of credit monthly payment increased to $436, up 43% year-over-year, while the average monthly mortgage payment rose to $2,032, or 15%..“As available disposable incomes become more stretched, we expect a segment of consumers will be more likely to miss payments and as a result, that delinquency rates will rise,” Matt Fabian, TransUnion’s director of financial services research and consulting said in a press release. .“However, we expect any rise in delinquency rates to be moderate and in line with increased credit activity.”.In a presentation on its website, Equifax blamed ”substantial” house price increases, higher loan amounts, a higher proportion of variable-rate mortgages and the elevated cost of living have contributed to the delinquency rise..“Additionally, payment shocks for newly renewed mortgages and upcoming renewals are poised to impact consumer finances, particularly for those facing mortgage terms that extend beyond their expected retirement age, leaving them with limited options for reducing monthly payment costs,” said Rebecca Oakes, Equifax’s vice-president of advanced analytics..Consequently there have also been significant increases is the rise in consumer proposals — basically debt restructuring for consumers — Equifax reported. It’s a last respiratory before bankruptcy..The largest increase is among mortgage holders, which are up 42% from last year and 25% increase among those without a mortgage..“Consumer proposals are there as a tool to help them manage financial stress if you have assets, so perhaps we actually would see a little bit more coming through for that mortgage group,” Oakes noted..Despite a slowdown in overall mortgage growth, which rose 1% in the quarter, total consumer debt in Canada jumped 1.9% to an all-time high of $2.4 trillion — mostly in the form of higher credit card balances..While demand from existing credit holders was down about 2.2%, loan growth was was driven by new customers applying for credit for the first time which Equifax said is correlated to higher immigration numbers..“This increase was masked by the influx of new credit users in Canada who have much lower debt levels when they first become credit active,” Oakes said..TransUnion said it expects delinquency rates to rebound to pre-pandemic levels following the upcoming holiday season, which is the biggest spending period of the year..“Overall, the financial position of Canadian credit consumers improved coming out of the pandemic, bolstered by higher savings accumulated through the pandemic and supported by a strong labour market,” Fabian added.
In a sign Canada’s interest policies are starting to take a toll — as they were designed to — delinquency rates on home mortgages and equity lines are on the rise according to credit monitoring agency Equifax..The kind of debt that affects credit scores..The 30-day delinquency rate on non-mortgage debt — credit cards and car loans — was up 26.3% in the second quarter compared to the same period of last year, according to Equifax Canada’s Q2 Consumer Credit Trends and Economic Insights report..Mortgage delinquencies were 32.6% above year-ago levels, but remain 36% lower than pre-pandemic levels in 2019..No surprise, the provinces with the highest mortgage default rates also have the highest house prices: Ontario and 86.9% and BC at 33.9%..Likewise, missed payments on home equity lines are up 71% compared to last year and are just 12.8% below 2019 levels. .Minimum monthly payments for credit card and unsecured lines of credit increased by 11.7% and 18.3%, respectively. Equifax added HELOC holders have seen their payments rise by more than $200 a month on average..Those jibed with rival TransUnion's own report, which said the average line of credit monthly payment increased to $436, up 43% year-over-year, while the average monthly mortgage payment rose to $2,032, or 15%..“As available disposable incomes become more stretched, we expect a segment of consumers will be more likely to miss payments and as a result, that delinquency rates will rise,” Matt Fabian, TransUnion’s director of financial services research and consulting said in a press release. .“However, we expect any rise in delinquency rates to be moderate and in line with increased credit activity.”.In a presentation on its website, Equifax blamed ”substantial” house price increases, higher loan amounts, a higher proportion of variable-rate mortgages and the elevated cost of living have contributed to the delinquency rise..“Additionally, payment shocks for newly renewed mortgages and upcoming renewals are poised to impact consumer finances, particularly for those facing mortgage terms that extend beyond their expected retirement age, leaving them with limited options for reducing monthly payment costs,” said Rebecca Oakes, Equifax’s vice-president of advanced analytics..Consequently there have also been significant increases is the rise in consumer proposals — basically debt restructuring for consumers — Equifax reported. It’s a last respiratory before bankruptcy..The largest increase is among mortgage holders, which are up 42% from last year and 25% increase among those without a mortgage..“Consumer proposals are there as a tool to help them manage financial stress if you have assets, so perhaps we actually would see a little bit more coming through for that mortgage group,” Oakes noted..Despite a slowdown in overall mortgage growth, which rose 1% in the quarter, total consumer debt in Canada jumped 1.9% to an all-time high of $2.4 trillion — mostly in the form of higher credit card balances..While demand from existing credit holders was down about 2.2%, loan growth was was driven by new customers applying for credit for the first time which Equifax said is correlated to higher immigration numbers..“This increase was masked by the influx of new credit users in Canada who have much lower debt levels when they first become credit active,” Oakes said..TransUnion said it expects delinquency rates to rebound to pre-pandemic levels following the upcoming holiday season, which is the biggest spending period of the year..“Overall, the financial position of Canadian credit consumers improved coming out of the pandemic, bolstered by higher savings accumulated through the pandemic and supported by a strong labour market,” Fabian added.
