Equifax sees Canadian delinquencies creeping up this year

Fewer people completely paying off their credit cards a small red flag for the company

OTTAWA— Canadian delinquency rates, which have been declining since the last recession, will probably reverse and begin to climb by the end of 2018 as the central bank presses ahead with interest rate increases, according to the country’s largest credit reporting firm.

Regina Malina, senior director of analytics at Equifax Canada, predicts late payments on the country’s $599 billion of credit card, auto and other nonmortgage consumer debt will begin to move “modestly higher” by the end of 2018.

“Our prediction is that we will start to see delinquency rates inching up a little bit, and debt probably slowing down,” Malina said in an interview.

The delinquency rate — which measures the number of payments on non- mortgage debt that were more than 90 days past due — was 1.08 per cent in the first quarter, up slightly from the fourth quarter, but still close to the lowest level since the 2008-09 recession.

The Toronto-based analyst declined to estimate how high delinquencies will climb, saying it depends on the pace of interest rate increases and what happens in the trade battle between the U.S. and Canada.

She cited the experience in Alberta, where delinquency rates rose in some instances 20 per cent or 30 per cent on a yearover-year basis after the oilprice collapse.

But such an extreme case isn’t what Equifax is predicting.

“It will only happen if we start seeing deterioration in employment numbers,” she said, adding delinquencies should remain “still very low.” And “they’re just going to start inching up a little bit, probably not double digits.”

A red flag in the Equifax data was a decline in the share of people who completely pay off their credit cards each month. The 56 per cent who did so in the first quarter matched the fourth-quarter number and was down from as high as 59 per cent last year. It’s a small, but important detail, Malina said.

Excluding mortgages, Canadians carry an average of $22,800 each in debt.

Other highlights include (all figures exclude mortgage debt): Those between the ages of 46 and 55 have the highest average debt loads, at $34,100. That age group is also seeing the largest increase in debt, year-overyear, at 4 per cent. Of nine cities listed, Fort McMurray had the highest average debt levels, at $37,800, as well as the highest delinquency rate, at 1.72 per cent.

Vancouver and Toronto saw the highest rate of debt accumulation in the first quarter, with 5.2-per-cent and 5-percent growth from a year earlier. Montreal is the least indebted city, with average debt loads at $17,300. Ontario and British Columbia have the lowest delinquency rates, at 0.95 per cent and 0.84 per cent. Nova Scotia, at 1.74 per cent, had the highest.