Staggering Increase in Consumer Debt
As of Q3 2023, Canada’s total consumer debt has reached an unprecedented $2.4 trillion, marking an $80.9 billion increase from the previous year. This surge occurs despite the current economic climate of high interest rates and a slowing economy, as reported by Equifax® Canada’s latest Market Pulse Consumer Credit Trends and Insights.
Credit Card Debt Skyrockets to Record Levels
A significant driver of this debt increase is the spike in credit card usage. Credit card balances have peaked at $113.4 billion, the highest ever recorded, representing a 16% jump from last year. Remarkably, over 6 million new cards were issued in the past year, a 13.7% increase from 2022.
Factors Driving the Surge in Credit Card Debt
Rebecca Oakes, Vice-President of Advanced Analytics at Equifax Canada, attributes this rise in credit card debt to multiple factors, including the rising cost of living, higher interest rates, and economic slowdown. These elements are exerting substantial pressure on household budgets, making it challenging for many Canadians to manage their finances effectively.
Alarming Rise in Delinquencies Across Canada
The report also sheds light on an increasing trend of missed payments on credit products nationwide. The rate of Canadians missing at least one payment has escalated from 1 in 31 during the pandemic to 1 in 25 in Q3 2023. This trend is particularly pronounced in Ontario and British Columbia, with an alarming rise in severe delinquencies.
Housing Market Strains Amid Economic Slowdown
The Canadian housing market is also feeling the pinch, with a 9.5% drop in new mortgage originations compared to last year. Despite these challenges, the average loan amount on new mortgages increased to $343K. This indicates that affordability issues and high interest rates are significant deterrents for Canadians considering new mortgages.
Analysis of Debt and Delinquency Rates by Age and Region
Equifax’s data provides a detailed breakdown of debt and delinquency rates across various age groups and major Canadian cities. Notably, older age groups tend to have higher average debts, while delinquency rates are rising across the board. Major cities like Toronto and Vancouver are experiencing notable shifts in both debt levels and delinquency rates.
This report from Equifax Canada paints a concerning picture of the financial health of Canadian consumers in 2023. With rising debt levels and an increasing number of delinquencies, it’s clear that economic pressures are having a tangible impact on households across the country.