Equifax data reveals spike in rates for mortgages, credit cards
Finding hundreds of extra dollars for a mortgage payment well above what you have come to expect, while also seeing the minimum payment for your credit card soaring, is a step too far for many Canadians.
With many already concerned about how soaring housing costs could impact their retirement plans, new data from Equifax Canada reflects mortgage renewals at elevated rates and larger credit card balances led to a rise in the delinquency rates for these – and other – credit products in the last three months of 2023.
The stats reveal a 52% increase in the 90+ days overdue delinquency rate for mortgages and a 29% rise for non-mortgage credit. The overall numbers remain low (0.14% for mortgage and 1.3% for non-mortgage) but with more mortgage renewals ahead and household budgets squeezed, it’s likely they will rise.
Homeowners with mortgages have seen their post-renewal payments rise by an average $457, but in Ontario and BC the average is $680. These provinces have also seen a larger percentage rise in mortgage delinquencies (135% and 62% respectively).
Worryingly, Equifax’s research shows that mortgage payments and credit cards are often missed in tandem and in Ontario and BC missed payments on credit cards are being driven by homeowners under 36 years of age. Delinquency rates are rising slower in other provinces where mortgage loans tend to be smaller.
“As we assess the unfolding dynamics in the housing market, it's evident that upcoming mortgage renewals will be pivotal for many homeowners,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada. "With the prospect of renewing mortgages at substantially higher rates than current ones, consumers who locked in historically low interest rates in 2020 — particularly those with substantial loan amounts — may face challenges in sustaining their payments.”
Overall, consumer credit products saw 153,000 more consumers miss payments in 2023 including increases for the non-bank auto sector, used car bank loans, and unsecured lines of credit.
Rising debt
Equifax data shows a 3% rise in overall consumer debt to $2.45 trillion in the fourth quarter of 2023, but seasonally adjusted credit card figures suggest a drop year-over-year. But Canadians are less likely to clear their credit card balance in full compared to a year earlier.
“Inflation levels are starting to fall across Canada, but sustained high consumer good prices combined with rising monthly credit payment levels means some will likely be pulling back on discretionary spend,” said Oakes. "Credit card balances that were being driven by a rise in consumer spending are now being driven by reduced payment levels instead.”
There were six million new credit cards issued in 2023, up 11% from 2022, and auto leases rebounded, rising by almost 30% from the lows of 2022.
With bankruptcy and other insolvencies rising year-over-year, although below pre-pandemic level, there is concern that the worse could be yet to come.
“Factors such as high cost of living, inflation, credit card payments, and mortgage renewal worries are coming at consumers right now,” said Oakes. “Budgets have been pushed to the limit for some. There's no doubt Canadians are feeling the financial pinch right now.”
