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Equifax Canada said consumers in Ontario and British Columbia increasingly missed payments on mortgages and credit cards in the fourth quarter of 2023, increasing consumer debt. Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, said in an interview that the fourth quarter saw a continuation of what’s been happening for a while now as the effects of higher interest rates and inflation continue to weigh on consumers as mortgage delinquency rates soars.
She said these effects are becoming more visible as people renew their mortgages and in areas where housing prices are higher in Canada. Equifax Canada is seeing that strain start to increase and seeing missed payments coming out more and more on the credit side for individuals,” Ms. Oakes said. The agency said mortgage delinquency rates soared in those provinces, surpassing pre-pandemic levels.
In Ontario, the mortgage delinquency rate was up 135.2 percent compared with a year earlier, while B.C.’s rate rose by 62.2 percent. The agency said that financially stressed homeowners in those provinces also increasingly need credit payments, a trend primarily driven by homeowners who are 36 years old and younger.
“What we are seeing in Ontario and B.C., in particular, is that as consumers are coming up to the end of their term periods on their mortgage, whether that’s fixed or variable, and they’re renewing their mortgage, there are payments shocks that are happening for individuals, and that’s something we knew was coming,” Ms. Oakes said. “And for some individuals, unfortunately … it’s a tipping point.”
She said that younger consumers tend to have higher mortgage amounts and less savings to lean on. “As you tend to get financial stress, the credit card does tend to be one of the first things where we see missed payments coming through,” Ms. Oakes said. “It definitely is a worrying trend.”
Ms. Oakes said housing prices are higher in B.C. and Ontario, contributing to the heightened delinquency levels and missed payments in those provinces. Outside of B.C. and Ontario, where mortgage amounts tend to be lower, Equifax Canada said mortgage delinquency rates are rising slower and are still much lower than pre-pandemic levels. Mortgage delinquency rates across the country rose 52.3 percent in the fourth quarter compared with a year earlier, while delinquency rates for non-mortgage debts over 90 days overdue rose by 28.9 percent.
Equifax Canada said that as homeowners renew their mortgages in a much higher interest rate environment, consumers who locked in historically low rates in 2020 may need help maintaining their monthly payments. Monthly mortgage payments rose by an average of $457 in the fourth quarter after the renewal. In B.C. and Ontario, that increase exceeded $680.
Ms. Oakes said that approaching mortgage renewals will be pivotal for many homeowners.
Total consumer debt hit $2.45 trillion in the fourth quarter, up 3.2 percent from the previous year. Non-mortgage debt rose by 4.1 percent due to increased credit card debt.
The number of consumers missing payments on credit products also increased, surpassing 2019 levels. While consumer insolvency levels are still below pre-pandemic levels, Equifax Canada said that the sharp increase in mortgage holders filing for bankruptcy is a worrying trend.
According to the Office of the Superintendent of Bankruptcy, consumer insolvencies were 23.5 percent higher in January than a year earlier.
Contact a Sunlite Mortgage agent for a free mortgage renewal consultation on debt consolidation or if you have received your mortgage renewal and would like a second opinion from one of our sixty lenders for a loser mortgage rate.
