While Canada’s national credit delinquency rate is at a record low, consumers—especially seniors—have accumulated more debt, a survey reveals.
In the second quarter of this year, the national 90-plus-day delinquency rate declined compared to the past three years, reaching a record low of 1.2%, according to Equifax Canada’s Q2 2013 National Consumer Credit Trends Report.
At the same time, the survey of the credit-monitoring company reveals that Canadian consumers have acquired more debt despite recent efforts from regulators to tighten lending standards. Canada’s total debt rose by nearly $77 billion, or 6.1%, from last year’s level. This is due to an 8.6% increase in auto loan balances and a 7.4% increase in outstanding mortgage debt.
The 65-plus age group had the greatest year-over-year increase in debt levels.
“The traditional golden years that retirees anticipated have not become a reality as debt loads rise for those over 65,” says Henrietta Ross, CEO of the Canadian Association of Credit Counselling Services. “With reduced incomes, often coupled with increased expenses, these individuals are accumulating more debt to boost income through credit so that they can continue to enjoy a pre-retirement lifestyle that they may no longer be able to afford.”
Seniors might also be piling on debt to provide financial assistance to their grown children or their parents, Ross adds.
The study also reveals that serious delinquency rates were stable across lending products and provinces. Toronto had the highest delinquency rate among major metropolitan areas, at 1.6% of non-mortgage balances. The fraction of mortgage loans that were 90 or more days delinquent fell to 0.27% in the second quarter of 2013 from 0.33% a year ago.
“Stable home prices and improvements in the labour market should continue to support the market in the future, while the outlook for consumer credit remains positive,” says Cristian deRitis, senior director of consumer credit economics at Moody’s Analytics. “A sudden rise in interest rates or deterioration in fundamentals in key export markets are risks to this forecast, however.”
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