credit and debt
CREDIT THRILLS: CANADIANS PAY THEIR BILLS Rising delinquency rates are a sign that another shoe is yet to drop. It should be settling, then, that in Canada they remain stable.
Following the changing delinquency rates associated with various forms of credit and debt is useful when trying to better understand where there are potential pitfalls for the economy as it evolves. Rising delinquency rates, for example, may very well reflect a growing inability to service debt, which itself may reflect wages that are not growing sufficiently or an unemployment rate that is rising. Falling delinquency rates are more likely to be seen when incomes are stable and growing, and the unemployment rate is low and/or falling. When considered over the past five years, the delinquency rate associated with HELOCs, LOCs, and credit cards has been relatively
low and stable—both good things. For these three types of credit, the most recent associated delinquency rates (as of Q2 2018) were 0.15%, 0.61%, and 1.66%, respectively. Compared to one year previous, these rates were down by 3% for LOCs and by 4% for credit cards, while remaining unchanged for HELOCs. In comparison, auto loan delinquencies rose considerably during 2015, at the same time Canada’s unemployment rate began to tick upwards. As with the unemployment rate increases, the auto delinquency rate rise was relatively short-lived, having fallen by 11% in the past year.
CANADIAN DELINQUENCY RATES & EMPLOYMENT: TWO PEAS IN A POD
›
2.5%
16.0%
14.0%
2.0%
12.0%
1.66%
10.0%
1.5%
1.50%
8.0%
5.9%
1.0%
6.0%
0.61%
4.0%
0.5%
2.0%
0.15%
0.0%
0.0%
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017 2018
HELOC
CREDIT CARD
AUTO
LOC
CANADIAN UNEMPLOYMENT RATE
SOURCE: MORTGAGE & CONSUMER CREDIT TRENDS, CANADA MORTGAGE & HOUSING CORPORATION
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