Non-Mortgage Growth Slowing Considerably
According to Equifax Canada’s latest report on Canadian consumer credit, a resurgence in mortgages pushed consumer debt 4.4 per cent higher at the end of 2019 from the same period last year to $1.989 trillion. Homebuyers have adjusted to the 2018 stress test with mortgage debt rising 5.2 per cent to $1.341 trillion. Non-mortgage debt was up only 2.7 per cent in the fourth quarter compared to Q4 2018.
“Outside of mortgages, we have seen a significant pull back in demand for credit,” notes Bill Johnston, Vice-President of Data and Analytics at Equifax Canada. “Adjusting for population growth, non-mortgage debt did not even keep pace with inflation in the last half of 2019. That is a significant slowdown from the torrid pace set in Q1.”
Average debt per consumer reached $72,950 at the end of 2019, an increase of 2.7 per cent from 2018. Non-mortgage debts, including credit cards, l**** and lines of credit, were up a very modest one per cent to $23,800. Lower use of credit lines represented the most significant drag on non-mortgage growth, but even auto finance l**** were down one per cent compared to last year. This reflects moderating demand for new credit products. In total, 36.5 per cent of credit-active Canadians posted higher non-mortgage debt levels, a modest decline from the peak Q4 level observed in 2017.
Mortgage growth has returned with the average new mortgage amount reaching $289,000 nationally in the last quarter of 2019, a 7.2 per cent increase year-over-year. The average new mortgage in Toronto rose by 8.5 per cent to $448,000, the highest increase on record. Vancouver also reported a significant rebound to $455,000 (+7.4%), recovering the deterioration from the last two years.
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More consumers feeling the strain
Slowing debt growth and a sluggish consumer debt economy has resulted in higher 90+ day delinquency rates (the percentage of credit users that have missed 3+ payments). The delinquency rate rose to 1.19 per cent (11%) for non-mortgage debt, the highest mark since 2012. British Columbia (+14.4%), Ontario (14%) and Alberta (13.3%) led the way higher. Alberta, in particular, has erased all of their previous recovery and delinquency rates are now back above their 2016 level.
Mortgage delinquency rates were also higher at the end of 2019. The 90+ day delinquency rate ended the year at 0.18 per cent. This is the highest Q4 level since 2016, but remains low in historical terms. British Columbia, Ontario and Alberta had the most significant increase, with Alberta at the highest delinquency levels for mortgages.
“On the whole, 2019 played out as we expected,” states Johnston. “Consumers had figured out the mortgage stress test and were back in the housing market. Auto l**** and lines moderated with delinquency rates marching higher for much of the year. These trends are likely to continue for much of 2020, assuming no major change in economic conditions or interest rates.”
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Consumer proposals still rising
“The slowdown in non-mortgage consumer debt growth is a positive sign for the long-term health of consumer finances, but the prolonged uptrend in consumer proposals remains a concern,” concludes Johnston. “These tools are often positioned as better than bankruptcy, but they still have a very significant impact on a consumer’s access to future credit. People need to fully understand the implications and use it as a last resort, not an easy, short-term fix.”
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