CORRECTION: An earlier version of this story stated that average credit card balances in Canada were the highest since 2007, according to a press release from Equifax Canada. In fact, raw data shows that average credit card balances in Canada have not been higher since Equifax Canada began collecting data in 2007. This story has been updated.
Canadians’ average credit card balance has risen to its highest level 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 numbers and falling interest rates have not led to improved indicators for credit cards, mortgages and auto loans, Equifax said in the second quarter. Market pulse Report shows – partly because the employment situation in Canada has worsened. Total consumer debt was $2.5 trillion in the quarter, an increase of 4.2 percent from the previous year.
“Unfortunately, rising unemployment has offset some of the positive aspects and is leading to increased financial stress,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada. The impact of higher unemployment on credit data tends to be more severe, she says.
“When inflation is high, we tend to see an increase in credit, more money being put on things like credit cards, we may see payment rates go down and maybe a little delinquency,” Oakes said. “If a consumer loses their job or is unemployed, they ultimately can’t make payments – and that has a more immediate, shocking impact on the credit situation.”
Expenditure remains the same, but payments decrease
Average credit card balances exceeded $4,300 in the second quarter – the highest since Equifax Canada began collecting data in 2007. Total outstanding balances rose to $122 billion, up 13.7 per cent from a year earlier. Oakes said consumer spending has remained largely flat, but balances are still rising because fewer people are paying back the full amount. Monthly payments fell across all age groups, but the biggest drop was among those under 35, according to Equifax.
“Hopefully inflation stabilization will support some of that,” Oakes said. “But there is no buffer, particularly for many younger consumers.”
The data is consistent with recent figures from Statistics Canada showing that younger Canadians face greater financial stress.
Consumers ages 26 to 35 had the highest rate of delinquencies on credit products other than mortgages, at 1.99 percent, while the average for all age groups was 1.4 percent. That total is 23.4 percent higher than a year ago and the highest since 2011, according to Equifax. Among the 26- to 35-year-old age group, delinquencies on auto loans and lines of credit were “particularly high,” the report said, “reflecting the greater financial pressures facing this demographic.”
Housing problems persist
The report also provides a number of data that illustrate the ongoing affordability issues in Canada’s housing market. Credit card balances rose more among mortgage holders than others in the second quarter, while average mortgage loan amounts rose 6.1 percent year-on-year.
Housing prices in many parts of Canada hit record highs earlier this year, according to data from the Desjardins Group. (The situation improved slightly in July, when mortgage rates followed the recent downward trend in the Bank of Canada’s overnight rate.)
The report says the share of first-time home buyers has continued to decline compared to pre-pandemic levels, and indicates that more buyers are accepting longer payback periods.
Equifax found that 15 percent of mortgage renewals in 2024 saw monthly payments increase by more than $300, about double the eight percent increase in 2019. In Ontario and British Columbia, the share was even higher, at around 20 percent, Equifax says.
The report suggests that the Bank of Canada’s interim interest rate relief “hasn’t yet trickled down to consumers,” Oakes said. If rates fall by a full percentage point, “we would expect to see some relief trickle down to businesses,” she adds. The housing market situation will be different, however, because people renewing their mortgages now have typically had rates at their lowest ever in the COVID era – so any renewals next year will come with some pain.
“I think it’s going to be a pretty slow process before we really feel the impact of the rate cuts,” Oakes said.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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