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B.C., Ontario mortgage-holders increasingly missed payments in Q4, Equifax says

Consumers in Ontario and British Columbia faced a growing challenge in meeting their mortgage and credit card payments during the last quarter of 2023, according to Equifax Canada. The ongoing trend, impacted by rising interest rates and inflation, has intensified as people renew their mortgages, particularly in regions with higher housing costs.

Rebecca Oakes, Equifax Canada's Vice President of Advanced Analytics, highlighted the strain on consumers as mortgage renewals unfold, leading to an increase in missed payments on credit cards. The fourth quarter witnessed a notable surge in mortgage delinquency rates in Ontario, escalating by 135.2% from the previous year, and in British Columbia, rising by 62.2%. These figures surpassed pre-pandemic levels, signaling the financial stress faced by homeowners in these provinces.

Equifax Canada pointed out that financially stressed homeowners, especially those aged 36 and younger, are increasingly missing credit payments. The end of mortgage term periods, whether fixed or variable, triggers payment shocks for individuals, contributing to a concerning trend that Oakes emphasized.

In particular, younger consumers, burdened by higher mortgage amounts and limited savings, are more vulnerable to financial stress, making credit cards the first avenue where missed payments become evident. Oakes expressed deep concern over this worrisome trend.

The higher housing prices in British Columbia and Ontario contribute significantly to the elevated levels of delinquency and missed payments in these provinces. Conversely, outside these regions, where mortgage amounts are lower, Equifax Canada reported a slower increase in mortgage delinquency rates, which remain considerably lower than pre-pandemic levels.

Nationwide, mortgage delinquency rates rose by 52.3% in the fourth quarter compared to the previous year, while delinquency rates for non-mortgage debts over 90 days overdue increased by 28.9%. As homeowners navigate renewals in a higher interest rate environment, those who locked in historically low rates in 2020 may find it challenging to maintain their monthly payments. Equifax Canada revealed that post-renewal, monthly mortgage payments increased by an average of $457 in the fourth quarter, with B.C. and Ontario experiencing a more substantial increase exceeding $680.

The upcoming mortgage renewals are expected to be pivotal for many homeowners, as Equifax Canada highlighted the potential challenges in maintaining payments. In the fourth quarter, total consumer debt reached $2.45 trillion, marking a 3.2% increase from the previous year. Non-mortgage debt also rose by 4.1%, primarily driven by a surge in credit card debt.

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 notable in Ontario and B.C. According to the Office of the Superintendent of Bankruptcy, consumer insolvencies in January were 23.5% higher than the previous year, underscoring the severity of the situation and the need for careful financial management in the face of these challenges.