Yahoo Finance Average Canadian credit card balance highest on record, with young adults hardest hit: Report
'Rising unemployment has offset some of the positives and is driving increased financial stress'
CORRECTION: A previous version of this story stated that average credit card balances in Canada are the highest since 2007, as per language in a release from Equifax Canada. In fact, the raw data show that average credit card balances in Canada have not been higher in the time since Equifax Canada began collecting the data, which was in 2007. This story has been updated.
Canadians’ average credit card balance swelled to its highest value in at least 17 years, with signs of ongoing financial stress most pronounced among younger adults, according to the latest consumer data from Equifax Canada.
Stabilizing inflation figures and easing interest rates have not translated to improved indicators for credit cards, mortgages and auto loans, Equifax’s second-quarter Market Pulse report shows — in part because Canada’s employment situation has deteriorated. Overall consumer debt was $2.5 trillion in the quarter, a 4.2 per cent increase year-over-year.
“Unfortunately, rising unemployment has offset some of the positives and is driving increased financial stress,” said Rebecca Oakes, Equifax Canada’s vice-president of advanced analytics. The impact of higher unemployment on credit data tends to be sharper, she says.
“When inflation is high, we tend to see credit increasing, more money being put on things like credit cards, we see, potentially, payment rates coming down and a little bit of delinquency, maybe,” Oakes said. “Ultimately if a consumer loses their job or they are unemployed, they can't make any payments — and that has a more immediate, shock impact to the credit situation.”
Spending flat, but payments drop
Average card balances exceeded $4,300 in the second quarter — the largest amount since Equifax Canada began tracking that data in 2007 — pushing overall outstanding balances to $122 billion, 13.7 per cent more than a year earlier. Oakes says that consumer spending has been largely flat, but balances are nonetheless rising because fewer people are paying off the full amount. Monthly payments declined across all age groups, but the biggest drop was people under 35, Equifax says.
“Now, hopefully inflation stabilizing is going to prop up some of that,” Oakes said. “But for a lot of younger consumers in particular, there's no buffer.”
The data align with recent Statistics Canada figures that show younger Canadians feeling greater financial stress.
Consumers aged 26 to 35 had the highest rate of missed payments for credit products other than mortgages, at 1.99 per cent, with the average across all age groups at 1.4 per cent. That overall figure is 23.4 per cent higher than a year ago and the highest since 2011, Equifax says. For the 26 to 35 age group, delinquency rates for car loans and lines of credit were “particularly high,” the report says, “reflecting the broader financial pressures faced by this demographic.”
Housing issues persist
The report also provides a variety of data illustrating the ongoing affordability issues in Canada’s housing market. Credit card balances rose more for mortgage holders than others in the second quarter, while average mortgage loan amounts climbed 6.1 per cent over last year.
Housing in many parts of Canada hit records for unaffordability earlier this year, according to Desjardins Group data. (The situation improved slightly in July as interest rates for mortgages followed the recent downward path of the Bank of Canada’s overnight rate.)
The report says the proportion of first-time homebuyers continued to drop versus pre-pandemic levels, and notes that more buyers are taking on longer amortization terms.
Equifax found that 15 per cent of mortgage renewals in 2024 had monthly payments go up more than $300, roughly double the eight per cent figure in 2019. The proportion was even higher in Ontario and British Columbia, at around 20 per cent, Equifax says.
The report suggests that the Bank of Canada’s preliminary interest rate relief has “not yet fed its way through to benefiting consumers, particularly,” Oakes says. If rates come down a full percentage point, “we would expect to see some relief feed through for businesses,” she adds. But the housing situation will be different, because people renewing their mortgages now generally had COVID-era rates so low they were almost without precedent — so any renewals in the next year will involve some pain.
“I think it's going to be quite a slow journey, to really see the impact of rate cuts come through,” Oakes said.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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