Saskatchewan households are showing signs of mounting financial distress as the province suffers from a prolonged bout of economic weakness, compounded by a global trade war that’s taken direct aim at its key exports.
People in Saskatchewan are falling behind on debt payments – both for mortgages and other loans – to a greater degree than the rest of the country. Home foreclosures have roughly doubled over the past five years, and since the 2014 oil crash, consumer insolvencies have surged at a faster clip than in Alberta.
“When you compare the situation in Saskatchewan to other provinces, it really does stand out,” said Robert Hogue, senior economist at Royal Bank of Canada. "Clearly [the numbers] paint a fairly tough financial picture for many people in Saskatchewan.”
Household debt troubles have been a national issue, but much of the focus has been on Ontario’s suburbs or B.C.'s Lower Mainland, thanks in large part to staggering home prices. But over five years, Saskatchewan has absorbed no shortage of economic hits – including drought, mine closings and subpar commodity prices – forcing some households into a more precarious position.
Since 2014, the percentage of residential mortgages that are delinquent has roughly tripled to 0.86 per cent, according to the Canadian Bankers Association. (These are mortgages in arrears, or with payments late by three months or more, and is sourced from Canada’s largest lenders.) The rate is near a 27-year high, and is easily the highest in the country.
Put another way, Saskatchewan has more delinquent mortgages than B.C. – but only one-fifth of B.C.’s total mortgages.
In some cases, the outcome is grim. The number of mortgage-foreclosure notices and home-sale cancellations has nearly doubled over the past five fiscal years, to just over 1,400 in 2018-19, according to the Provincial Mediation Board.
Back when oil prices were lofty, “people got very comfortable [thinking] we’re always going to make this amount of money,” said Pamela Meger, a Regina-based licensed insolvency trustee with MNP Ltd.
For many, that’s no longer the case, and the adjustment has been rough.
“When people panic, they look to higher-interest loans to try to avoid defaulting on the mortgage, and then that’s when this little cycle of debt starts,” Ms. Meger said.
That’s apparent in the numbers. The delinquency rate in Saskatchewan on non-mortgage debt – which includes credit cards and installment loans – was 6.8 per cent in the second quarter, according to credit-reporting agency TransUnion Canada. That is the highest outside of Atlantic Canada.
In dollar terms, the average non-mortgage debt owed per borrower in Saskatchewan was $31,100, fourth in the country behind Alberta, B.C. and Ontario. But people in Saskatchewan appear to be struggling more with that debt load: the non-mortgage delinquency rate jumped 5.8 per cent from a year ago, versus 0.7 per cent for Canada as a whole.
“I think there’s a bit of a concern if you’re a lender in Saskatchewan … that it seems like [consumers are] having trouble pulling out” of their delinquencies, said Matthew Fabian, director of financial services research and consulting at TransUnion Canada.
On top of this, more and more are filing for insolvency. As of August, there were about 3,400 consumer insolvencies over the previous 12 months, federal data show. That’s close to double the sum from five years earlier. (Insolvencies are comprised of both bankruptcies and proposals, which are offers to pay back a portion of owed money, extend payment timelines, or both.)
Higher insolvency filings and foreclosures are “almost normal for me right now, which is very sad,” said Ms. Meger of MNP. “I've been doing this for 17 years now, and this is probably the busiest I've ever seen it through all of the ups and downs of the economy.”
Much like Alberta, Saskatchewan was sent reeling by the oil shock, and the industry’s investments remain subdued. But its economy has also taken a particularly hard hit from global trade tensions.
This year, China halted purchase of some Canadian agricultural products, notably canola seed. All told, the bans affect 6 per cent of Saskatchewan’s exports, an outsized impact relative to other provinces, RBC data show. Canola exports have plummeted, stockpiles have surged and prices are languishing, delivering pain to local farmers.
“You go into rural Saskatchewan, it’s pretty much the main topic of conversation,” said Mr. Hogue of the province’s trade woes.
That’s partially why RBC slashed Saskatchewan’s growth forecast by nearly half, projecting the economy will grow by a tepid 0.6 per cent in 2019, tied with Alberta for worst in the country. One major drag is retail sales. RBC projects they will decline by a deeper 0.7 per cent this year.
If there’s a glint of strength, it’s the labour market. Hiring has been solid of late, and the unemployment rate (at 5.3 per cent) is actually a touch lower than the national average.
Broadly speaking, economists expect Saskatchewan’s growth to pick up in 2020, with RBC calling for a 1.9-per-cent gain, putting it middle-of-the-pack among the provinces. Plus if hiring strengthens, household balance sheets should improve, Mr. Hogue said. And there’s always the hope trade restrictions will be lifted.
“If that were to occur, then it would further improve the outlook for the province,” he said.
Matt Lundy