The strains on Canadian consumers in Ontario and British Columbia are deepening, with a notable rise in missed payments on mortgages and credit cards during the fourth quarter of 2023, according to Equifax Canada. Rebecca Oakes, the vice-president of advanced analytics at Equifax Canada, explained that the ongoing impact of higher interest rates and inflation is causing these financial challenges for consumers.
This trend becomes more apparent as individuals renew their mortgages, particularly in regions where housing prices are steep. Oakes emphasized that the strain is intensifying, leading to an increasing number of missed payments on credit cards. Mortgage delinquency rates in Ontario and British Columbia have surged beyond pre-pandemic levels, with Ontario experiencing a staggering 135.2% increase compared to the previous year, while British Columbia's rate rose by 62.2%.
Equifax Canada pointed out that financially stressed homeowners in these provinces, especially those aged 36 and younger, are also missing credit payments. Oakes highlighted that the end of mortgage terms is causing payment shocks, especially for younger consumers who tend to have higher mortgage amounts and fewer savings.
As financial stress grows, credit cards are often the first area where missed payments occur. Oakes expressed concern about this trend, particularly in the context of higher housing prices in British Columbia and Ontario contributing to elevated levels of delinquency.
The situation is somewhat different outside these provinces, where mortgage amounts are generally lower. Equifax Canada noted that mortgage delinquency rates are rising at a slower pace in other regions, remaining much lower than pre-pandemic levels.
Nationally, mortgage delinquency rates increased by 52.3% in the fourth quarter compared to the previous year, and delinquency rates for non-mortgage debts over 90 days overdue rose by 28.9%. Equifax Canada warned that as homeowners face mortgage renewals in a higher interest rate environment, those who secured historically low rates in 2020 may struggle with their monthly payments.
The average monthly mortgage payment rose by $457 in the fourth quarter, according to Equifax Canada, with increases exceeding $680 in British Columbia and Ontario. Oakes highlighted the upcoming mortgage renewals as pivotal for many homeowners facing these financial challenges.
In the broader financial landscape, total consumer debt reached $2.45 trillion in the fourth quarter, marking a 3.2% increase from the previous year. Non-mortgage debt rose by 4.1%, primarily driven by a surge in credit card debt. The number of consumers missing payments on credit products has also surpassed 2019 levels.
While consumer insolvency levels are still below pre-pandemic levels, Equifax Canada expressed concern about the sharp increase in mortgage holders filing for bankruptcy, particularly in Ontario and British Columbia. This worrisome trend underscores the need for proactive measures to support homeowners facing financial difficulties in the current economic climate.
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