Pattie Lovett-Reid

Chief Financial Commentator, CTV

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Debt levels are climbing and so are delinquency levels.

That’s according to TransUnion Canada’s latest report, which is not to be cheered. It revealed Monday that outstanding credit card balances have passed the $100-billion mark for the first time as Canadians continue to borrow and rack up the debt amid historically-low interest rates.

Now, for the most part, Canadians continue to manage their payments. However, we need to pay special attention to one particular data point. A very real warning sign that is ringing the alarm bells for me is non-mortgage delinquency rates, which increased by nearly 26 basis points year over year to 5.54 per cent in the third quarter, according to TransUnion. While this number isn’t ridiculously high, it’s climbing.

Past reports from TransUnion have shown when Canadian consumers are faced with economic pressure, or feel financially distressed with credit cards, auto loans and mortgage payments, they will generally miss their credit card payment first, and keep up their good standing on other payments if forced to choose.

Here is why I believe that choice happens. When drowning in debt or feeling financially stressed, there can be a desire to maintain your car payments so you can get to and from work or look for a job. And the belief is you will do everything you can to keep a roof over your head. So the default choice becomes the easy choice.

Many experts have been warning of defaults, and 2020 could be the year we start to see this happen.

One observation from TransUnion is the mortgage market is starting to show signs of a ticking higher as many have bought into lower rates for a longer period. Add to this, we are seeing imbalances on the supply and demand of the housing market.

After stalling under the new mortgage regulations over the past year, we could see housing gain momentum in 2020. For now, the silver lining in the report is mortgage originations were up 4.5 per cent in the third quarter and average mortgage balances increased only modestly, up 1.3 per cent.

Finally, as pressure mounts in the oil-producing provinces, delinquencies in Alberta and Saskatchewan run the risk escalating. According to TransUnion, some regions could experience a delinquency rate increase of up to 50 basis points.

Households are acutely aware of how much debt they are carrying, and have expressed time and again how stressed they are about this situation. It is my thought that 2020 could be a watershed year for some households that ignore the signs they are living too close to margin.