Consumer Delinquencies Down (but don’t get too excited)

puking rainbows

Credit monitoring agency TransUnion says Canadians appear to be getting better at handling consumer debt. Really? Is anyone that gullible?

In a report just released this month TransUnion indicates that a shrinking percentage of debt payments are overdue by 90 days or more — even though the average balance owing continues to rise.

There was an overall delinquency rate of 2.58 per cent on non-mortgage consumer debts in the second quarter. That was down from a delinquency rate of 2.78 per cent in the second quarter of 2013 and 2.69 per cent in 2014.

TransUnion’s average consumer debt number rose to $21,028 in the three months ended June 30, about $148 higher than in the second quarter of 2014. Lines of credit accounted for 35 per cent of all non-mortgage consumer debt, which also includes credit cards and car loans.

Although some may chalk this trend up to the fact that Canadians are becoming increasingly aware of the importance of making payments on time we beg to differ. Human nature in general doesn’t really change. Not for the last millennia or two anyway (not to mention the last 3 years).

Although two interest rates cuts by the Bank of Canada since January is generally supportive in helping to keep delinquency rates in check (and the party going) at CASE we see the primary driver of consumer delinquency rates to be best linked to the overall unemployment rate. To wit, looking back at the national unemployment rates from Q2-2013 through Q2-2015 of 7.1%, 7.0% and 6.8% respectively it is easy to identify this correlation in trend.

With the above being said it will be interesting to see how delinquency rates move going forward, most especially here in Alberta, with the unemployment rate continuing to grind upwards during the January-July 2015 period from 4.5% to 6%. Levels of household savings help cushion the blow and prolong the impact on delinquencies numbers. But then again this is completely dependent on those levels of savings not to mention to length of time we see unemployment rates continue to elevate. The writer will revisit this topic and our prognostication on this topic in late November once we’ve had a chance to review Q3-2015 numbers and drill down to the provincial level.


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