More Canadians are taking on added debt due to the high cost of living, leading to an increase in missed loan and credit card payments, according to new reports from Equifax and TransUnion.
Consumer debt in the third quarter of 2024 hit a record high of $2.5 trillion – a 4.1 per cent increase over last year.
As consumers take on more debt, serious delinquencies – when accounts are 90 days or more past due – have increased almost two per cent since last year.
“Consumers are just not able to keep current on all their payments in all their cases so we are seeing delinquencies creep up a bit,” said Matt Fabian, researcher and consultant with TransUnion.
TransUnion said high housing costs, the price of groceries and other inflationary pressures are making it harder for Canadians to pay the bills, especially for Millennial and Gen Z consumers (who range from their teens to early 40s).
“The cost of living is higher and interest rates are higher, so I think that creates a payment shock for a lot of Canadians who all of a sudden things are less affordable and the cost of covering your debt becomes a little more expensive,” Fabian said.
Equifax’s report says interest rate cuts are providing some relief to consumers, but notes newcomers to Canada and consumers who are new to credit are having issues making their payments.
The report found 1.3 million consumers missed credit card payments in the third quarter of this year, which is a 10.6 per cent increase over the same period last year.
“The group of consumers that entered Canada we are seeing their debt levels grow at a faster rate than we would typically expect, and we see missed payments coming faster then we would expect for that population,” said Rebecca Oakes with Equifax.
As we enter the holiday spending season, both credit reporting agencies said it’s important for consumers not to miss any of their payments, as doing so will eventually lead to higher borrowing costs.
“If you do go out and apply for additional credit elsewhere, you may find it’s hard to get access to credit. You may find you don’t get the best rates, and the missed payments may impact your credit score,” said Oakes.
As interest rates come down, bank loans to buy a vehicle were up nearly three per cent over the same time last year. The number of people who borrowed money to buy cars from “non-bank” sources jumped 12 per cent.