Flat Delinquency Rate Masks Canadian Credit Worries, Equifax Says

(Bloomberg) -- The national delinquency rate on Canadian consumer debt stayed little changed in the fourth quarter, though there were still signs of deterioration, according to the country’s largest credit reporting firm.

Across all age groups, the national delinquency rate on debt excluding mortgages rose to 1.07 percent, an increase of 0.4 percent compared with the same quarter a year earlier, Equifax Canada said in a report Tuesday. The rate fell or was flat in the youngest age groups, those between 18 and 55, while it increased for those older than 56.

Bill Johnston, vice president of data and analytics, said the marginal increase in the national delinquency rate is masking underlying weakness in the country’s credit markets. He pointed to the third straight year-over-year increase in late payments for seniors, as well a trend of late payments in auto loans and leases.

The delinquency rate is up from the previous quarter’s 1.05 percent, which was the lowest since at least 2013, the data show. The rate had been declining on a year-over-year basis since the end of 2016.

“The overall delinquency rate was up very marginally, but you’re starting to see it getting a little bit broader,” Johnston said by phone from Toronto.

The 90-day delinquency rate on debt excluding mortgages for those older than 65 climbed for a third straight quarter to 0.96 percent at the end of 2018, Equifax said. That’s a 7.2 percent increase from the fourth quarter a year earlier, and follows gains in the prior quarters of 4.3 percent and 4 percent.

Johnston says seniors have become “the first point of strain,” partly because in many cases they’re carrying large balances on their home equity lines of credit. The delinquency rate among seniors is still below the Canadian average, but it’s rising faster than any of the other age demographics, he said.

Mortgage delinquency “remained very low, but did trend higher in many regions,” Equifax Canada said in a statement. Manitoba posted a 19 percent increase in 90-day mortgage delinquencies, and Saskatchewan rose 9 percent. Quebec and Ontario also saw increases -- 4 percent and 2 percent -- breaking a trend of declines that stretched back to at least 2015.

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