The average consumer debt continues to rise in Alberta with the highest level in the country, according to the latest Equifax Canada Q2 2018 National Consumer Credit Trends Report which was released on Wednesday.
Calgary and Edmonton had the highest levels of debt of major Canadian cities and Alberta had the highest for all the provinces.
The report said Calgary’s average debt (excluding mortgages) was $29,853 in the second quarter, which was up 2.0 per cent from a year ago while Edmonton’s rose by 4.2 per cent to $28,377. Fort McMurray’s average debt was three per cent higher than a year ago to $38,950. For Alberta, the average was $29,132, up 3.2 per cent from a year ago.
Delinquency rates remained low – 1.17 per cent for Calgary; 1.43 per cent for Edmonton; 1.69 per cent for Fort McMurray; and 1.3 per cent for Alberta. The rates have fallen from a year ago by 2.9 per cent in Calgary; 3.7 per cent in Edmonton; 0.4 per cent in Fort McMurray; and 5.6 per cent in Alberta.
The report said total consumer debt including mortgages in Canada continued its upward climb to $1.864 trillion in the second quarter, up from $1.828 trillion in the first quarter (+2.0 per cent) and $1.769 trillion a year ago (+5.4 per cent). It said there is growing concern that delinquency rates will also begin to rise in the coming months.
“Higher interest rates, slower economic growth and a dampening effect on new mortgage volume will likely spur an uptick in delinquency rates. The 90 day+ delinquency rate is down 3.1 per cent compared to Q2 2017. It is, however, up slightly from 1.08 per cent in Q1 to 1.10 per cent in Q2 of this year,” said the report.
“There’s a trifecta of factors in play,” said Bill Johnston, vice-president of Data & Analytics at Equifax Canada. “Consumers will have tighter cash flows as interest rates climb further, which can lead to people not paying off their credit cards in full each month. After a period of sustained economic growth, we’re moving back to a slow and steady pace. And finally, new mortgage volume has been negative over the last three quarters. Add these together and we should begin to see upward movement in delinquencies.”
The report said average non-mortgage debt was up three per cent in the past year, climbing to $23,271 per person nationally. On a debt classification basis, instalment loan, mortgage, and auto loan sectors increased modestly to 10.8 per cent, 5.4 per cent and 6.7 per cent year-over-year, respectively.
“There are certainly signs that new credit demand is slowing,” said Johnston. “A hot car market and home renovations are driving instalment loans. And, at this point, a slow down or less reliance on lines of credit is a positive step as the market moves through a rising rate phase.
“Big ticket purchases have instalment loans leading credit growth but lines of credit still represent the biggest share of consumer debt. Given that they typically have variable rates, lines will be the first point of impact for higher interest rates and we are already seeing some of that kicking in.”
Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald, including 12 years as a senior business writer.
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