Canadian delinquency rates to stay low even as interest rates rise in 2018

By: Jessica Mach on November 30, 2017

Consumer delinquency rates in Canada, which are already low by international standards, are set to stay virtually unchanged in 2018, according to a new report released on Thursday by credit reporting company TransUnion.

This consistency applies to both mortgage and non-mortgage debt. Credit card delinquencies are expected to see the biggest uptake, rising from 3.02%  in 2017 to 3.34% between the fourth quarters of 2017 and 2018, says TransUnion.

Delinquency rates show whether debt payments are being made on time. For credit cards, more than 90 days past the payment due date is considered delinquent. For all other credit products, it’s more than 60 days.

But low delinquency rates doesn’t mean Canadians necessarily have healthy financial habits. Some critics have warned that they are only one part of a complex picture.

In an article for Maclean’s published this past July, financial advisor Scott Terrio noted that Canadians statistically prioritize paying mortgage payments above other debts and expenses, including contributing to their savings. Eliminating debt at the expense of building an emergency fund, Terrio warned, could lead to trouble if unexpected fees come up.

“This type of scenario is far more common than people realize, and certainly far more common than the present record-low delinquency rate indicates,” Terrio writes.

Like Terrio, the TransUnion report says that Canadians generally prioritize paying their mortgages, especially in strong housing markets.

This trend remains strong even as Canadians are incurring record levels of mortgage debt, as well as increasing levels of non-mortgage debt.