In 2019, total insolvencies hit their highest level since the immediate aftermath of the global financial crisis and recession, according to a report from Scotiabank Economics.
“Through the year, consumer insolvencies trended upward on the backdrop of rising household debt burdens, sparking concern over the ability of households to manage their debt,” the report said.
Despite the high annual total, new insolvencies declined for the second straight month in December.
Consumer insolvencies were at their lowest level since January 2019, Scotia said in the report, noting that this “follows a rather stable — though recently weakening — macroeconomic picture accompanied by strength in employment, and favourable borrowing rates as the Bank of Canada keeps the overnight rate on hold.”
Still, on a seasonally adjusted basis, new insolvencies were up on both a month-over-month and year-over-year basis in December.
“The rise in the seasonally-adjusted trend emphasizes that the lower number of insolvencies in December is still high,” the report said.
The report also noted that defaults on larger debts “such as mortgages, HELOCs, and lines of credit remained relatively low through the year.”
The report added that Canadians aged 65+ “have the highest share of mortgage loans in arrears.”
With mortgage delinquencies remaining low, defaults on auto loans increased in 2019.
On the business side, the insolvency trend “remains on an overall declining trajectory in the period following the Great Financial Crisis as the stability of interest rates continues to stimulate repayment on larger loans,” the report said.