Mortgage delinquencies are rising in Canada, with overall debt levels increasing, according to the Equifax Canada Q4 2024 Market Pulse Consumer Credit Trends report, released February 25.
“Total consumer debt in Canada reached $2.56 trillion at the end of 2024, a 4.6% increase over 2023,” says Rebecca Oakes, vice-president of Advanced Analytics at Equifax Canada, in the report.
“Non-bank auto loans drove much of this increase, rising 11.7% year-over-year, while the average non-mortgage debt per consumer reached $21,931, exceeding pre-pandemic levels.”
Debt levels and delinquencies vary across the country, said Oakes.
“While some consumers are doing better and seeing financial improvements from lower interest rates, financial pressures have intensified for some Canadians, as well as mortgage holders in certain regions, in particular in Ontario and British Columbia,” said Oakes.
“At first glance, the numbers are not concerning, but when we look deeper at a more granular level, many are feeling the strain of high living costs and mortgage renewals with higher payments, while other consumers are doing better and seeing financial improvements from lower interest rates and income growth.”
“The 90+ days mortgage balance delinquency rate in Ontario surged 90.2% year-over-year to 0.22%.”
Alberta stands alone with a decrease in delinquencies, of 3.6%, while BC saw an increase of 37.7%, Quebec up 41.2%, the Atlantic provinces increased 5.7% and Manitoba and Saskatchewan saw a 0.6% increase.
The Bank of Canada (the bank) lowered its overnight rate to 0.25% in March 2020, causing banks to lower their prime rates from 2.95% to 2.45%.
Many homeowners took out five- and three-year mortgages between 2020 and 2022, mortgages which are renewing this year, posing a potential financial risk for many Canadians amidst economic challenges.
"Many consumers renewing their mortgage continue to have higher monthly payments due to elevated interest rates compared to pre-pandemic and pandemic levels, when they last locked in their low rates," said Oakes.
"This reality is expected to affect around a million mortgages due for renewal in 2025, originating from the low-interest-rate environment of 2020. These borrowers may face significantly higher payments despite recent rate reductions. A quarter of mortgage-holders saw their monthly mortgage payment increase by over $150 at renewal in Q4 2024."
The bank has cut its benchmark interest rate from 5% to 3% since June, 2024, easing some financial strain. However, mortgage rates remain significantly higher than the ultra-low rates seen during the pandemic.
The average five-year fixed mortgage rate was 4.29% at the end of 2024, down from 5.22% a year earlier, according to Mortgagelogic.news.
"While these reductions offer some relief, today’s rates remain far higher than the sub-2% levels seen during the pandemic, when historically low borrowing costs fueled a real estate boom," said Oakes.
“Our numbers are telling us that there are more consumers struggling. We are not seeing delinquency rates slowing.”
