Average debt hits $21,696 but Canadians can handle it

Iman Sheikh
Non-mortgage debt hits $21,69 (The Canadian Press)

Canadians are borrowing more but managing to pay off loans on time, according to a new TransUnion report.

Average non-mortgage debt levels in Canada rose nearly two per cent in the last year, landing at $21,696 in the first quarter of 2017.

“The consumer credit market in Canada is expanding, and is doing so in a healthy manner,” Matt Fabian, director of research and consulting for TransUnion Canada, has said. “More consumers are gaining access to credit, and credit limits have been increasing at a strong rate during the last two years. At the same time, serious delinquency rates have remained relatively low. It’s especially encouraging to see some major Canadian markets lead the way in delinquency declines and credit growth, as it bodes well for Canada’s overall economic activity.”

The rate of delinquencies on non-mortgage accounts over 90 days also dropped 1.5 per cent from a year ago. Only 2.72 per cent of accounts are not receiving scheduled payments on time. The declines in failures to make required payments are seen most around major cities, the report says, with Toronto’s delinquency rate down 7.55 per cent, Montreal’s down 2.51 per cent and Ottawa down 2.37 per cent.

In Calgary, however, average non-mortgage debt sits at $28,184 and the average delinquency rate rose by 6.64 per cent. Vancouver’s delinquency rate, where the average debt of $25,579 is higher than Toronto’s and the national average, also rose slightly by 1.85 per cent. Edmonton’s average debt is only slightly lower at $24,354, with a 4.84 per cent rise in non-payments.

The number of Canadian consumers owing money to a credit card company sits 20.4 million as of the end of the first quarter of 2017, rising 3.5 per cent from the same period in 2015. The tier of borrowers with less-than-stellar credit, known as sub-prime consumers, have helped these numbers. In 2015, only nearly 2.1 million people from this market had access to credit cards. Today, it’s 14 per cent higher at 2.5 million. And they’re managing to make payments on time; serious delinquency rates for subprime borrowers dropped 9.4 per cent in the last two years.

Canadians also like to own wheels. One of the fastest growing segments in consumer credit is auto lending. The average balances in the last year rose to $18,783 in Q1 2017, and increase of 2.75 per cent in a year. Again, consumers are good at making payments on time, with serious delinquency rates (0 days or more past due) remained low and more or less unchanged in the last year (1.70 per cent in Q1 of 2017 versus 1.67 in Q1 of 2016).

“Despite an extended period of growth, auto loans continue to perform extremely well,” Fabian has said. “More prime and above consumers are originating auto accounts and at higher amounts, while delinquency rates remain at historically low levels.”