Money

‘New normal’ looms for Canadians with end of COVID-19 postponement programs


Overall consumer debt soars as mortgage activity increases

/EIN News/ – TORONTO, March 4, 2021 (GLOBE NEWSWIRE) – Rising mortgage activity and rising house prices in the fourth quarter of 2020 pushed aggregate consumer debt levels to $ 2.07 trillion, up 1.5% from last quarter and up 4.1% from the fourth quarter of 2019, according to Equifax Canada’s most recent report on consumer credit conditions.

Despite the increase in total debt, average consumer debt (excluding mortgages) declined further this quarter to $ 23,043, a year-over-year decline of 3.0% and a decrease of 0.8% compared to the previous quarter. The decline in consumer debt is mainly attributed to credit card balances, which have been gradually declining since March of last year due to reduced spending and consumers paying off more of their balances on a regular basis. monthly.

“This reduction has been a positive change for consumers, but that doesn’t mean we’ve gone out of the woods in terms of a recovery,” said Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada. “Deferral programs are ending and pockets of financial stress are starting to appear for some consumers. Credit card spending is also starting to rise again. “

Deferral and unpaid bills during the pandemic

More than three million Canadians have benefited from the deferral of credit payments since the start of the pandemic and four in five of them have now completely abandoned the deferral programs. Payment deferrals have helped prevent consumers affected by the pandemic from defaulting on their debt obligations. Even when consumers exit deferral programs, the 90-day and above default rate for non-mortgage products remained at the same level in the fourth quarter at 0.98%, while the same rate for mortgages was 0. , 16%. However, early-stage delinquency (when a person missed a month or two in payment) continued to increase in the fourth trimester. Mortgages saw a 31% increase in the 30-day-plus late payment rate, while the 30-day-plus late payment rate on installment loans jumped 76% from the third quarter of 2020.

“The numbers suggest that the recovery will remain very patchy,” Oakes added. “Quebec, for example, has shown that early non-mortgage delinquencies continue to decline despite consumers abandoning deferral programs, while Alberta has the largest increase in consumers missing mortgage payments. Support mechanisms across Canada remain essential in preventing the increase in delinquency rates.

Home buyers, low interest rates and loans
Strong housing demand and falling interest rates continued to fuel new mortgages with volume growth of 22.1% year over year in the fourth quarter of 2020. Average loan size Mortgages increased 14.4% from the fourth quarter of 2019, marking the largest year-over-year increase since 2015. Higher loan amounts can also be attributed to first-time homebuyers which experienced above-average year-over-year volume growth of 26.9% in the fourth quarter of 2020.

“Rising prices in real estate hot spots have led first-time homebuyers to take on more mortgage debt than ever before in order to step onto the real estate ladder,” Oakes said. “For example, in British Columbia, we saw average new mortgages for first-time buyers exceed $ 470,000 in the last quarter, but they are not discouraged; volumes increased by more than 35% compared to the same period in 2019. ”

New auto financing and installment loans trended down this quarter with 8.4% and 21.5% year-over-year decline respectively, as new credit cards recover slowly with an increase of 10% compared to the last quarter.

Lenders are also showing some signs of caution due to this uncertain period. Consumers are still offered additional credit, but for higher interest rate products like credit cards, limits on newly opened cards have been lower over the past two quarters compared to the same periods in 2019. .

“During times of economic uncertainty, consumers and lenders can take proactive steps to reduce variability in credit commitments, by changing or encouraging the use of products with lower interest rates,” Oakes said. . “We are still in uncertain times with the emergence of isolated pockets of financial stress. We will continue to monitor this closely over the next few months. “

Debt (excluding mortgages) and default rate

Age Average debt
(Q4 2020)
Average change in debt
Year after year
(Q4 2020 vs Q4 2019)
Delinquency rate
(Q4 2020)
Change in delinquency rate
Year after year
(Q4 2020 vs Q4 2019)
18-25 $ 8,747 -1.13% 1.29% -21.48%
26-35 $ 17,868 -2.35% 1.37% -20.04%
36-45 $ 27,893 -3.36% 1.10% -19.64%
46-55 $ 35,252 -2.73% 0.86% -16.27%
56-65 $ 29,369 -3.13% 0.77% -14.77%
65 and over $ 15,871 -3.76% 0.91% -13.90%
Canada $ 23,043 -3.02% 0.98% -17.52%

Big city analysis – Debt (excluding mortgages) and late payment rate

City Average debt
(Q4 2020)
Average change in debt
Year after year
(Q4 2020 vs Q4 2019)
Delinquency rate
(Q4 2020)
Change in delinquency rate
Year after year
(Q4 2020 vs Q4 2019)
Calgary $ 28,829 -3.22% 1.19% -13.60%
Edmonton $ 27,319 -3.64% 1.43% -10.57%
Halifax $ 22,584 -4.16% 1.17% -23.12%
Montreal $ 17,103 -4.76% 0.94% -27.25%
Ottawa $ 21,891 -3.82% 0.82% -17.23%
Toronto $ 23,200 -1.24% 1.09% -13.75%
Vancouver $ 26,172 -1.59% 0.69% -15.02%
St. John’s $ 25,155 -1.54% 1.35% -22.27%
Fort McMurray $ 39,717 0.11% 1.69% -13.02%

Province Analysis – Debt (excluding mortgages) and late payment rate

Province Average debt
(Q4 2020)
Average change in debt
Year after year
(Q4 2020 vs Q4 2019)
Delinquency rate
(Q4 2020)
Change in delinquency rate
Year after year
(Q4 2020 vs Q4 2019)
Ontario $ 23,883 -2.14% 0.91% -15.31%
Quebec $ 18,888 -4.76% 0.75% -28.82%
New Scotland $ 21,969 -2.98% 1.37% -23.59%
New Brunswick $ 23,217 -2.74% 1.51% -18.52%
PEI $ 23,070 -0.70% 0.96% -21.91%
Newfoundland $ 23,836 -0.99% 1.40% -23.71%
eastern region $22 832 -2.32% 1.40% -21.89%
Alberta $ 28,099 -3.36% 1.36% -10.96%
Manitoba $ 18,030 -4.68% 1.21% -17.93%
Saskatchewan $ 23,927 -3.48% 1.32% -16.54%
British Columbia $ 24,317 -2.15% 0.83% -14.66%
Western region $24,988 -2.95% 1.12% 13.60%
Canada $23,043 3.02% 0.98% -17.52%

* Based on Equifax data for the fourth quarter of 2020

About Equifax
At Equifax (NYSE: EFX), we believe knowledge is the engine of progress. As a global data, analytics and technology company, we play a vital role in the global economy by helping financial institutions, businesses, employees and government agencies make critical decisions with more confidence. . Our unique combination of differentiated data, analytics and cloud technologies enables better understanding and decision making to get people moving. Based in Atlanta and supported by more than 11,000 employees worldwide, Equifax operates or has investments in 25 countries in North America, Central and South America, Europe and the Asia-Pacific region. For more information visit Equifax.ca and follow the company’s news on LinkedIn.

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