Equifax Canada report shows some groups are struggling more than others
Canadian consumers have been given some relief from their debt burden recently as the Bank of Canada cut interest rates. But some groups are still showing elevated signs of financial stress.
A new report from Equifax Canada reveals that while delinquency rates are flattening out among some consumer groups, newcomers to Canada and those who are relatively new to credit are finding things tougher.
More than 1.3 million Canadian consumers missed a credit payment in the third quarter of 2024, almost an 11% increase year-over-year. But the delinquency rate, while elevated, has slowed and this is particularly evident among mortgage holders where the second quarter’s 11.7% rate eased to 9.5% in the third quarter as lower rates took some of the pressure off.
Among those who have only been credit active for 12-36 months, 1 in 22 missed a credit payment in Q3 2024, up from 1 in 28 a year ago.
“Recent newcomers to Canada are facing challenges in navigating the Canadian financial economy. Historically newcomers have demonstrated strong credit performance in the first few years of being in the country,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada. “However, rising unemployment levels combined with high inflation in the last few years has likely added significant financial pressure to this group. Equifax Canada is committed to championing financial inclusion for newcomers to Canada with business solutions such as our Global Consumer Credit File.”
Rising debt
Canadian consumer debt keeps rising – up 4% year-over-year to $2.54 trillion in Q3 – with non-mortgage debt rising 3.8% and taking the average to $21,810 per active credit consumer, almost $800 more than a year ago.
Auto loans are a key part of this with non bank auto loan debt up 12% year-over-year while bank auto loans went up by 2.7% year-over-year.
“We are finally starting to see small affordability improvements for consumers to purchase and finance vehicles,” said Oakes. “Reductions in used car prices along with better rate deals for new cars are helping to drive an increased demand for auto loans.”
Credit card debt was up 9.4% overall, partly due to population growth but also because more consumers were unable to pay their balance off in full. And while discretionary spending eased in the third quarter, Oakes says those struggling with debts should restrain holiday expenses.
“While recent rate cuts have alleviated some of the strain for some people, the financial pressures on Canadians remain significant,” she said. “We are seeing that those that get into debt are having a hard time getting out of it. As the holiday season approaches, consumers should consider their personal financial positions when making spending decisions to avoid financial strain.”
