Late payments are also increasing.
A recent column addressed the ongoing decline in Canadian per capita GDP:
With falling per capita GDP, we would expect to see mounting evidence that people are struggling more and more to keep up, especially as higher interest rates take a toll on an already-indebted consumer base.
And that evidence continues to present itself.
According to the TransUnion Canada Q4 2022 Credit Industry Insights Report (CIIR), credit participation is up in all provinces:
“More and more borrowers are looking to a range of credit products to cope with their financial pressures and better position themselves for the evolving financial landscape. Credit participation increased across all provinces, led by Ontario which saw a 3.2% increase in the number of credit-active consumers. Total outstanding balances also reached a new record high for the second consecutive quarter, increasing 6.8% year-over-year (YoY) to $2.3 trillion. Increases in average credit card and mortgage balances per consumer – up 7.2% and 4.5% YoY, respectively – largely drove this balance growth.”
While credit health remains above where it was in 2020 – when the government was flooding the economy with money enabling many to pay down debt balances – there is a trend of both increased credit usage and reduced credit performance:
“We are observing increased credit usage, as some consumers look to credit as a means to help stave off financial pressures. Additionally there’s been some deterioration in credit performance; however: overall credit market health remains at pre-pandemic levels,” said Matt Fabian, director of financial services research and consulting at TransUnion in Canada.
“Lenders are beginning to increase their provision for credit losses, but they’re not stopping their growth trajectory since delinquency levels are still below what they were prior to 2020. Canada is still in a good environment from a performance perspective, but lenders would do well to monitor trends closely,” he added.”
Delinquencies have now risen for three consecutive quarters:
“During Q4 of 2022, overall consumer-level serious delinquency (90 days or more past due) increased 11 bps YoY to 1.51%. While overall delinquency levels remain below pre-pandemic levels, consumer-level delinquency has increased steadily over the last three quarters, with the most significant increases in recent months seen in unsecured credit products.”
Until Canada starts to see some real per capita GDP growth, the underlying factors pushing many Canadians into a more difficult financial situation are unlikely to change.
Spencer Fernando
