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Canadians are grappling with mounting financial pressures as credit card balances swell to their highest levels in over 17 years, according to the latest consumer data from Equifax Canada. The ongoing economic challenges are most pronounced among younger adults, highlighting the broader financial stress affecting this demographic.
Rising Credit Card Balances Amidst Stagnant Spending
Equifax Canada’s second-quarter Market Pulse report reveals that the average credit card balance for Canadians exceeded $4,300, the largest amount recorded since the company began tracking this data in 2007. This increase pushed overall outstanding balances to a staggering $122 billion, representing a 13.7% increase compared to the previous year.
Despite stabilizing inflation and easing interest rates, Canadians are not experiencing the expected relief in managing their debts. Spending levels have remained relatively flat, yet credit card balances continue to rise due to a decline in the number of people paying off their full balances each month. This trend is particularly troubling among younger Canadians, with those under 35 showing the largest drop in monthly payments.
Rebecca Oakes, an Equifax Canada analyst, notes that this pattern of rising balances amid stagnant spending is a clear indication of growing financial strain. “The data suggests that while consumers aren’t necessarily spending more, they are struggling to manage existing debt loads, leading to higher outstanding balances,” Oakes explained.
Younger Canadians Face Increased Financial Stress
The report underscores the financial challenges faced by younger Canadians, particularly those aged 26 to 35. This age group recorded the highest rate of missed payments for credit products other than mortgages, with a delinquency rate of 1.99%. The overall delinquency rate across all age groups stood at 1.4%, marking a 23.4% increase from the previous year and the highest level since 2011.
Equifax’s data also highlights that delinquency rates for car loans and lines of credit were notably high among the 26 to 35 demographic, reflecting the broader financial pressures faced by this group. The increased financial stress among younger adults aligns with recent Statistics Canada figures, which also indicate rising financial challenges for this age group.
Housing Affordability Remains a Challenge
The Equifax report also sheds light on the ongoing affordability crisis in Canada’s housing market. Despite a slight improvement in July, housing in many parts of Canada remains unaffordable for a significant portion of the population. The report found that credit card balances rose more for mortgage holders than for other Canadians during the second quarter, while average mortgage loan amounts increased by 6.1% year-over-year.
The proportion of first-time homebuyers continues to decline compared to pre-pandemic levels, as more buyers are forced to take on longer amortization terms to manage rising costs. Equifax’s data also reveals that 15% of mortgage renewals in 2024 resulted in monthly payments increasing by more than $300, a significant jump from the 8% recorded in 2019. This proportion was even higher in Ontario and British Columbia, where around 20% of renewals saw such increases.
Outlook: Rising Debt Amid Economic Uncertainty
As Canadians navigate these financial challenges, the growing debt burden, particularly among younger adults, raises concerns about the long-term economic health of the country. With overall consumer debt reaching $2.5 trillion in the second quarter of 2024, a 4.2% increase from the previous year, it is clear that the economic recovery remains uneven and fraught with challenges.
