/Delinquency rates climb to two-year high as Canadian credit card balances grow

Delinquency rates climb to two-year high as Canadian credit card balances grow

Delinquency rates in Canada climbed to the highest in two years as consumers added to credit card debt and auto loans took longer to pay off, according to Equifax Canada.

The 90-day delinquency rate gained to 1.12 per cent in the first quarter, up slightly from 1.08 per cent in the same quarter a year earlier, the country’s largest credit reporting firm said Tuesday. Delinquencies rose the most among those 65 years old and over, while British Columbia and Ontario saw the first “significant” increase in arrears in half a decade, the firm said.

“It’s not that people can’t cope, it’s just that we’ve been seeing more strain than we’d been seeing for the last couple of years,” Bill Johnston, vice president of data and analytics, said in a phone interview.

It’s not a red alert yet, but a warning sign

Bill Johnston, vice president of data and analytics

Tuesday’s report adds to evidence that Canadians may be increasingly feeling the pressure of record debt loads. Previous indicators have shown the country’s household savings rate fell to 1.1 per cent in the first quarter, close to the lowest level in records back to the 1960s. Canada’s debt-to-disposable income ratio is also among the highest in the developed world.

The credit card utilization rate — a measure of total balances relative to total available limits — rose to 23.8 per cent in the first three months of the year, the highest first-quarter level since 2011, and comparable to rates seen in 2007, Equifax said.

Balance growth on credit cards outstripped spending growth for the first time in several quarters, Johnston said. “People are starting to hold a little bit more in the way of credit card balances. Utilization has been rising. It’s not a red alert yet, but a warning sign,” he said, adding it sometimes indicates “tighter cash flows.”

Bloomberg.com