Equifax credit report highlights worsening state of Canadians' finances
Canadian households are continuing to ride a wave of challenging economic conditions and for some, that may put their most valuable asset at risk.
With the seemingly never ending wave of headwinds and uncertainties, relying on credit has been the only option for many people, taking the aggregate level of Canadian consumer debt to more than $2.5 trillion at the end of 2024. Fuelled by non-bank auto loans, average non-mortgage debt per consumer reached $21,931 in the fourth quarter.
But some households are at breaking point and the latest Equifax Canada report on consumer credit trends reveals that, in the fourth quarter of 2024, a divide was opening up between those who have benefitted from lower interest rates and those whose debts are overwhelming them.
In Ontario, for example, there has been a rise in mortgage borrowers missing payments – 11,000 of them, which is almost three times the level seen in 2022. And delinquencies among the province’s mortgage borrowers was more than 50% higher than pre-pandemic levels. Adding to this, is that average mortgage balances for Ontario homeowners are substantially higher.
The GTA’s substantial housing market is facing additional challenges as the construction industry blames costs for constraining supply.
And non-mortgage debt is also causing issues for many Ontarians with the 90+ day non-mortgage balance delinquency rate surging 46.1% year-over-year. In addition, Ontario’s overall rise in non-mortgage delinquency rate was 23.9%, above the national average of 18%.
The challenges are not exclusive to Ontario, although other provinces saw smaller increases in non-mortgage delinquency rates (90+ days): BC at 21.6%, Quebec at 23.3%, Alberta at 6.1 per cent, the Prairies at 4.1%, and the Atlantic provinces at 1.5%.
“Mortgage holders will typically do everything they can to keep up with payments,” said Rebecca Oakes, vice president of Advanced Analytics at Equifax Canada. “The fact that we’re seeing missed payments rise so sharply suggests deeper financial strain. Depending on the type of credit, missed payments have increased from 10 to 80 per cent, compared to pre-pandemic levels.”
Renewal pressure
The pressure on mortgage holders is exacerbated by the higher cost of renewals facing many. Around one million mortgages due for renewal this year will be at higher rates than when they were last locked in in 2020. In Q4, 2024, around a quarter of borrowers found their monthly payment increased by at least $150 on renewal.
“While some consumers are doing better and seeing financial improvements from lower interest rates, financial pressures have intensified for some Canadians, as well as mortgage holders in certain regions, in particular in Ontario and British Columbia,” added Oakes. “At first glance, the numbers are not concerning, but when we look deeper at a more granular level, many are feeling the strain of high living costs and mortgage renewals with higher payments, while other consumers are doing better and seeing financial improvements from lower interest rates and income growth.”
Credit card debt remains high and climbed 7.8 per cent in Q4 2024, although this pace was the lowest in two years. This type of debt has been cited as a major factor in consumer insolvencies in 2024.
Average credit card purchases adjusted for inflation reached $2,228 per cardholder amid seasonal spending trends, a 2.2% increase from 2023.
Younger and lower income Canadians are experiencing missed payments on credit cards, auto loans, and lines of credit, signaling financial strain among these groups.
“Despite recent rate cuts and GST tax relief, challenges persist for certain consumers, particularly in consumer debt and housing. The added uncertainty of U.S. tariffs underscores the need for a balanced approach to debt, affordability, and trade. The coming year will be critical for Canada's economic stability,” said Oakes.
