Mortgage debt is rising but there's a slowdown for other credit

Canada’s consumer debt is slowing down according to a new report from Equifax Canada.

The rise in mortgage debt pushed the overall level of household debt up 4.4% at the end of 2019 compared to a year earlier. Canadians had a combined total of $1.989 trillion in consumer debt.

This was driven by mortgages with a 5.2% increase year-over-year to $1.341 trillion, while non-mortgage debt was up 2.7% in the fourth quarter compared to the same period of 2018.

“Outside of mortgages, we have seen a significant pull back in demand for credit,” notes Bill Johnston, Vice-President of Data and Analytics at Equifax Canada. “Adjusting for population growth, non-mortgage debt did not even keep pace with inflation in the last half of 2019. That is a significant slowdown from the torrid pace set in Q1.”

There was a 2.7% increase in average consumer debt at the end of 2019.

That took the average to $72,950 per consumer. Without mortgages, the increase was a modest 1% year-over-year to an average $23,800.

Even auto-loans weakened with a 1% decline year-over-year and while 36.5% of credit-active Canadians posted higher non-mortgage debt levels, this was a modest decline from the peak Q4 level observed in 2017.

Mortgage debt rising
While credit cards, auto loans, and other lines of credit saw moderating growth, mortgages picked up with the average new mortgage amount reaching $289,000 nationally in the last quarter of 2019.

That was a 7.2% increase year-over-year nationally while the average new mortgage in Toronto rose by 8.5% to $448,000, the highest increase on record.

Vancouver also reported a significant rebound to $455,000 (+7.4%), recovering the deterioration from the last two years.

Struggling households
The slowdown in credit growth along with economic weakness has seen higher 90+ day delinquency rates.

For non-mortgage debt, delinquency rate rose to 1.19% (11%) f- the highest since 2012.

This was particularly evident in British Columbia (+14.4%), Ontario (14%) and Alberta (13.3%). For Alberta, it means the province’s previous recovery has been erased and delinquency rates are now back above their 2016 level.

Mortgage delinquency rates (90+ days) ended the year at 0.18%, the highest fourth quarter level since 2016, although still low in historical terms.

British Columbia, Ontario and Alberta had the most significant increase, with Alberta at the highest delinquency levels for mortgages.

“On the whole, 2019 played out as we expected,” states Johnston. “Consumers had figured out the mortgage stress test and were back in the housing market. Auto loans and lines moderated with delinquency rates marching higher for much of the year. These trends are likely to continue for much of 2020, assuming no major change in economic conditions or interest rates.”

Johnson added that the rise in consumer proposals is a concern and people should understand the implications on their future credit and only use them as a last resort.