Yahoo Finance Canadian consumer debt hits $2.36T as mortgages, credit card spending rise
Canadians had a collective $2.36 trillion in total consumer debt on household balance sheets in the third quarter, according to Equifax Canada’s latest credit trends report, It marks an increase of 7.3 per cent compared to the same time last year, after consumers saw their mortgages balloon and the cost of living surge.
Consumers were also turning to their credit cards more often in Q3. The report said Canadians charged an average of $2,447 per month, a 17.3 per cent increase from Q3 2021 and a 21.8 per cent rise from the pre-pandemic level of Q3 2019.
Rebecca Oakes, vice president of advanced analytics at Equifax Canada, said the reason for higher credit card spending is a combination of skyrocketing inflation and pent-up demand from the pandemic.
“Some of that is definitely large ticket items, things like vacations. Last year was the time to travel so we saw a lot of people putting vacations on their credit cards,” she told Yahoo Finance Canada in a phone interview.
“But also, we believe an element of that is consumers are starting to rely on their credit card more for things like the essentials, and we do expect that to be more on the low-income side where perhaps they haven't got as much buffer to handle the rising cost of living.”
She said Canadians who pay off their credit cards in full every month and those who maintain a balance were each generally spending more on their cards.
The average non-mortgage debt among consumers rose to its highest level since the fall of 2020, at $21,183, the report found.
Insolvencies were also on the rise, particularly among young people and seniors, who are feeling the strain of the high cost of living and increased spending, though insolvencies remained below pre-pandemic levels.
Car payments being missed more often
Financial stress related to autos also appears to be making a comeback, Oakes said.
Canadians are not only buying and leasing fewer vehicles, more consumers are starting to miss payments more frequently on their auto loans.
“Before COVID happened, the levels of missed payments were definitely on a bit of a high and then when the pandemic happened, and we had all these deferral programs and government support, it really dropped off in terms of missed payments,” she said.
"Consumers that are taking credit right now, we've seen them miss payments a lot quicker on, kind of, some of those newly-opened products. It definitely is an area of concern."
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.
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