Canadians borrowed more money last year than the year before, with total consumer debt in the last quarter of 2022 rising to $2.37 trillion, a 6.2 percent increase from the same period in 2021, according to a new report by Equifax Canada.
Over 1.4 million new credit cards were issued in the last three months of 2022, and over 300,000 more customers were using a credit card and carrying a balance as of December 2022 compared with the year before, the findings indicated.
New immigrants and refugees to the country also contributed to a rising number of Canadians using at least one credit product. The final quarter of 2022 saw a 3.2 percent increase in the number of consumers with at least one open credit product compared to the same fourth quarter in 2021, and 4.7 percent higher compared to pre-COVID numbers from the fourth quarter of 2019, the report stated.
“Canada has strong immigration targets with an aim to welcome 500k per year into the country by 2025,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, in the news release. “These individuals have credit needs, which adds to the growing demand for products.”
“Canadians are facing increasing financial pressure due to high inflation and rising costs of borrowing,” the news release said, noting that mortgage debt is 75 percent of overall consumer debt in the country.
The Equifax Canada news release said that “rising interest rates and the cost of borrowing” slowed the Canadian housing market, with a “significant” drop in new mortgages taken out during the last quarter of 2022.
Financial Stress
“Millennials are entering the most credit-active phase of their lives in a very challenging economic period,” Oakes said. “They may need to budget accordingly to deal with the higher cost of day-to-day necessities, as well as increasing high-interest loans.”Oakes said younger people have lower incomes and less savings in general, and may be relying more on credit cards. “They’re maybe starting to miss payments a bit more,” she told The Canadian Press.
Canadians with a mortgage may also be feeling a crunch. The Equifax Canada report said an analysis of 2022 Q4 data indicates the average mortgage is costing $170 more in monthly payments than before COVID. These costs are expected to rise further.
Oakes said in the news release that homeowners could face “future payment shocks” as mortgages come up for renewal.
“Other variable rate products like home equity lines of credit (HELOCs) are also being heavily impacted with minimum monthly payments rising by 24 percent compared to pre-pandemic levels,“ the news release said.
Oakes also said Equifax Canada is starting to see increases in missed payments on credit cards and auto loans, particularly for lower-income consumers. In the last 12 months, the number of credit cards and auto loans going more than 90 days delinquent was up 23 percent and 11 percent respectively.
According to Equifax, “severe financial stress is mounting for some individuals,” with more individuals filing for consumer proposals, a type of insolvency, than 12 months ago, up 26.4 percent in Q4 of 2022 compared to the previous year.
