Debt, delinquencies to increase: report
TORONTO Canadians will likely see a slight increase in debt and delinquencies next year, particularly in western provinces hit by downturns in the oil and farming industries, according to a new report by a consumer credit reporting agency.
The average Canadian’s non-mortgage debt may increase by one per cent to $31,531 by the end of 2020, said Transunion Canada in its forecast. Delinquency rates may fall to 5.41 per cent this year from 5.54 per cent at the end of September before increasing to 5.44 per cent by the end of next year, the data showed.
Transunion analyses consumer credit across Canada for its Industry Insights Report geared to retailers, banks, lenders and other credit card issuers.
The estimated increase in delinquency rates is an early warning of a potentially weakening market for issuing credit, Transunion said.
It also noted the “significant milestone” of total outstanding credit card balances in Canada exceeding $100 billion in the third quarter for the first time.
“While the Canadian economy has slowed, key measures such as inflation and unemployment remain healthy and continue to bolster the market,” Matt Fabian, director of financial services research and consulting for Transunion Canada, said in a statement. “However, a potential slowdown in the Canadian economy, combined with soft wage growth, heightened global economic uncertainty and potential further interest rate increases, may cause some challenges.”
Credit card delinquencies may rise to 2.9 per cent by the end of next year from 2.8 per cent at the end of September, Transunion said. The average credit card balance may increase to $4,465 by the end of 2020 from $4,240 at the end of September, it said.
“In addition to being used to facilitate retail purchases, credit cards are often used by consumers to finance essential living expenses; the continued increase in card balances could be a sign of the growing pressure on personal finances,” the agency said.