Canadian consumers pile on debt but mortgage delinquencies fall

Canadian consumers pile on debt but mortgage delinquencies fall

TORONTO (Reuters) - Canadians took on more consumer debt in the second quarter and average mortgage loan balances also increased, but delinquency rates fell, a major credit report provider said on Tuesday.

Years of ultra-low interest rates since the financial crisis spurred a borrowing binge and helped drive Canadian household debt to record levels in recent years, fueling a housing boom that has recently began to falter.

Non-mortgage debt balances averaged C$22,154 ($17,612) in the quarter, up 2.7 percent from a year earlier, TransUnion's report showed. However, serious delinquency rates, which incorporate repayments more than two months overdue, fell by 8 basis points to 2.65 percent.

Average mortgage loan balances rose by 4.8 percent in the last year to C$198,781 at in the middle of 2017, TransUnion said, reflecting rising house prices. Serious delinquency rates for mortgages fell by 4 basis points to 0.56 percent, the third consecutive quarter of declining delinquency.

TransUnion Canada's Director of Research and Analysis Matt Fabian said home values had continued to rise compared to the previous year, pushing overall mortgage debt levels up, but there was an easing of that trend in the second quarter compared with the previous quarter.

Fabian said serious delinquency rates had remained low with consumers able to manage their repayments despite the increasing balance levels.

"We will continue to monitor these trends especially as interest rates rise, though we don't anticipate a material impact on mortgages in the near term," he said.

The Bank of Canada raised interest rates for the first time in nearly seven years on Wednesday, raising concerns that highly-indebted consumers could struggle with making increased repayments.

The report showed rising delinquencies in two categories, credit cards and auto loans, which economists say are often the first to show evidence that consumers are struggling to keep their finances under control.

Serious credit card delinquencies rose by 5 basis points to 3.11 percent and auto loan delinquencies increased by 9 basis points to 1.8 percent.

($1 = 1.2579 Canadian dollars)

(Reporting by Matt Scuffham; Editing by Nick Zieminski)