Credit delinquency accelerates in Canada

By Alia McMullen, Canwest News ServiceJuly 3, 2009 2:01 PM

TORONTO — More than half a million Canadians have fallen behind on their credit payments as economic conditions deteriorate, a survey has found.

The average delinquency rate for Canada reached 1.52 per cent in May, data compiled by Equifax Canada Consulting Solutions showed. The pace of delinquency growth accelerated 19 per cent in May from a year earlier, up from 13 per cent in April.

The delinquency rate is based on payments for credits cards, bank loans, lines of credit, sales finance and personal finance that are more than 90 days overdue. It does not include mortgages.
"While we have seen delinquencies increase steadily since the beginning of the year, the rate of increase in the past three months has been significantly higher," said Nadim Abdo, the vice president of Equifax Canada.

He said the sharpest increase in the past year was in credit card and sales finance purchases, which increased by 38 per cent and 58 per cent, respectively. "Such transactions typically represent the purchase of durable goods, such as furniture or electronics, and consumers appear to be willing to fall behind on them first before they miss payments on their bank loans and lines of credit."

The rise in delinquencies has coincided with a rise in unemployment, which reached an 11-year high of 8.4 per cent in May. Abdo said delinquencies would likely continue to increase if economic conditions did not improve.

He said consumers that slipped behind on their payments now could struggle to access credit once the recession was over because of the impairment to their credit rating.

With the exception of Quebec City, all provinces and cities monitored by Equifax Canada experienced a rise in delinquencies since April last year.

On a yearly basis, average delinquency rates have increased faster in Western Canada and along the East Coast. Delinquencies rose 26 per cent in Alberta, 27 per cent in British Columbia and 26 per cent on Prince Edward Island.

Despite the sharper growth, delinquencies in B.C. and Alberta remained below the national average.

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Bilibala's comments:
The delinquencies rate is growing but 1.52% still looks health compare to our neigbour USA.