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Canadians keep up long-running credit binge in 1st quarter of 2017

Delinquency rates were up 6.64 per cent for the year in Calgary, 4.84 per cent in Edmonton, and 2.34 per cent in Regina. Debt loads increased slightly in the first two cities, while they declined in Regina.

I think its really interesting that the delinquency rate has actually dropped, said Elena Jara, director of education with non-profit credit counseling service Credit Canada Debt Solutions Inc.

Jarasaid shes seen a significant improvement in financial literacy since the 2008 financial crisis, and credited increased media awareness and better education by governments and credit counseling services.

Growth in subprime credit cards, auto loans

At the end of the first quarter of 2017, 20.4 million Canadian consumers were carrying a credit card balance, a 3.5 per cent increase from the first quarter of 2015.

Subprime borrowers in particular have signed up for lots of new credit cards in the past two years, with 14 per cent more gaining access to a card between the first quarter of 2015 and the first quarter of 2017.

Serious delinquency rates for subprime borrowers fell 9.4 per cent over the same time period. (TransUnion defines serious delinquency rates as accounts that are past due by two months or more.)

The credit information company says 2.5 million Canadian borrowers considered subprime now have access to credit cards.

We have been seeing that a lot of subprime borrowers have been acquiring credit, and the reason we see that is mainly because its become a lot easier to get credit lately, said Elena Jara ofCredit Canada Debt Solutions.

I think the lenders have eased up on the availability of credit to the high-risk consumers because they feel that the economy is doing well.

The $21,696 average non-mortgage debt in the first quarter of 2017 breaks down across four categories:

  • Auto loans: $20,141 (up 2.67 per cent annually).
  • Credit cards: $3,904 (up 2.23 per cent annually).
  • Instalment loans: $24,795 (up 5.46 per cent annually).
  • Lines of credit: $29,793 (down 1.81 per cent annually).

I find it concerning when I see that the largest growth was in auto instalment loans, said Scott Hannah of the Credit Counselling Society.

Many of those instalment loans have incentives for people to take out a loan [and make] a very low payment over an extended period of time, upwards of seven years, he said.

Those same individuals will find themselves underwater after about a year, when the depreciation on the value of that vehicle has declined faster than the amount of the loan.

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