Q4 overall consumer-level delinquency rate up 5.61%

The insolvency rate rose 11.5% from one year earlier

Q4 overall consumer-level delinquency rate up 5.61%

The fourth quarter of 2019 brought a rise in the overall consumer-level delinquency rate, although average non-mortgage debt balances per consumer were down, according to new data from TransUnion.

During the final three months of last year, Canada’s overall consumer-level serious delinquency rate – defined as consumers with delinquent payments 90 or more days past due, including 12 month rolling charge-offs – was 5.61%, up 37 basis points (bps) from the fourth quarter of 2018. Delinquency rates increased across the country, but TransUnion opined that the higher rates recorded in Saskatchewan, Newfoundland and Manitoba could be attributed to trade embargos on agriculture, while mining and oil prices bumped up delinquencies in the Prairies and high unemployment levels impacted Newfoundland.

Among credit products, the serious delinquency increases for captive auto loans and lines of credit were relatively small – up 8 bps and 1 bps, respectively – while credit card delinquencies declined 24 bps. TransUnion also found the fourth quarter insolvency rate was up by nearly 3% from the previous quarter and up 11.5% from the prior year, with much of the rate increases driven by borrowers in near prime and prime risk tiers.

“We are now starting to see increased pressure on personal finances, especially within certain segments of the population that have a higher sensitivity to interest rate changes,” said Matt Fabian, director of financial services research and consulting for TransUnion Canada.

“Rate rises in 2018 may be beginning to squeeze household budgets and drive higher delinquency and insolvency rates, although other macroeconomic factors, such as the impact of trade embargos, auto plant closures and rail strikes, have also played their part.”

But while delinquency and insolvency rates were going up during the fourth quarter, the level of average non-mortgage debt balances per consumer took a mild 0.5% year-over-year drop $30,106 while new account originations for many consumer credit products slowed. Fabian speculated that this stabilization “indicates that some borrowers may be stretched to manage their current debt levels and other household expenses, and consequently are shying away from taking on new debt.”

As for the mortgage market, TransUnion found new mortgage origination volumes in the third quarter of 2019 rose by more than 17% from the prior year’s volumes, with the strongest upward motion in Ontario (21%) and British Columbia (19%). Overall mortgage loan balances increased 3.4% year-over-year nationally, with Ontario leading the provinces with a vibrant 4.8% growth. At the other end of the spectrum, British Columbia – specifically in the Vancouver GTA – lagged behind with a nearly 4% year-over-year decline.

“The 17% surge in mortgage origination volumes compared to the same period the year prior suggests the mortgage market has fully adjusted to the new qualifying rules,” said Fabian. “Although growth in the average newly-issued mortgage amount was generally subdued, Ontario showed a healthy 4.8% growth, suggesting house prices in the region are once again on the rise.”