Quarterly credit trends report from Equifax Canada shows significant jump in total consumer debt
Amid rising macroeconomic pressures, total consumer debt has increased to $2.32 trillion, an increase of 8.2% in Q2 2022 compared to last year, according to the most recent Equifax Canada Market Pulse consumer credit trends and insights report.
Non-mortgage debt has increased to $591.4 billion, up 5.2% from Q2 2021, because of increases in new lending and higher spending that is correlated with inflation. The average consumer's non-mortgage debt has also increased by 2.4% to $21,128.
“The cost of living has been increasing across Canada and indeed globally with rising inflation being seen across essentials like housing and energy as well as many other goods and services,” said Rebecca Oakes, Vice-President of Advanced Analytics at Equifax Canada.
“Financial stress is becoming a very real thing for many more Canadians. Its impact on consumer credit is not just visible in day-to-day credit card spending, but also in other non-mortgage debt like auto loans and lines of credit, where balances are on the rise,” she added.
The biggest shift in consumer credit balance has been toward those with lower credit scores, who may have a higher risk of missing payments. Over the past quarter, credit card balances increased to their highest level since Q4 2019 and increased by 6.4% compared to the Q1 figures.
Consumer segments with credit scores under 620 saw their credit card balances increase by 7.4% in Q2 2022 compared to Q1 2022, and by 16.2% on a year-on-year basis. The average credit limit on new cards stands at more than $5,800, the highest in seven years, while monthly credit card spend for every card-holding consumer neared $2,370 in Q2.
While new mortgage loan amounts have not been significantly affected by the slowdown in the housing market, Equifax found monthly payments have increased. Among other findings, it said:
- The number of new mortgages issued in Q2 decreased by 16.4% from Q2 2021's peak levels;
- All buyers, first-time buyers in particular, have been affected by the high cost of housing;
- Even though the rate of price growth has slowed, first-time homebuyers' average loans only decreased slightly this quarter compared to last, while their average monthly payments rose 10%;
- With first-time homebuyer loans averaging $430,700, Canada's average new mortgage loan amount remained high at $367,500;
- Despite some price correction in these markets, the average loan amount for first-time homebuyers in Toronto and Vancouver has surpassed $600,000.
This has contributed to a rise in financial stress indicators, with consumer insolvencies reaching the highest levels since the onset of the pandemic. Consumer proposals, which say a 20.7% year-on-year rise, accounted for 76% of all insolvencies.
The number of credit accounts with missed payments rose for the third quarter in a row as 90 day+ account delinquency rates jumped 4%. Cracks in the financial picture are emerging, but have been obscured somewhat by large growth in overall non-mortgage debt combined with a fall in the average balance of delinquent accounts.
“The good news is that government and lender support during 2020 and 2021 led to overall reductions in debt levels. Balances on accounts where we are seeing consumers starting to miss payments are lower than 12 months ago,” Oakes said. “The not-so-good news is that over 100K more consumers missed a credit payment this quarter compared to last year. Around one in 30 of credit-using individuals failed to meet at least one credit commitment.”
