Based on coverage from Bloomberg and MSN.
In the world of personal finance, the numbers can often feel like a cold splash of reality. The latest Equifax Canada report is no exception, revealing that 1.4 million Canadians missed a credit payment in the second quarter of this year. While that might sound like a lot—and it is—there's a silver lining: this number is slightly down from the first quarter. But before we start popping the champagne, there's a deeper story here that deserves our attention.
Rebecca Oakes, the vice-president of advanced analytics at Equifax Canada, describes the situation as a mixed bag. On one hand, it's a relief to see the delinquency rate stabilizing. On the other, there's a growing financial chasm between different groups of Canadians, particularly between homeowners and non-homeowners. Imagine a seesaw where one side is slowly rising while the other struggles to keep its balance.
The report highlights a stark contrast: one in 19 Canadians without a mortgage missed at least one credit payment, compared to just one in 37 homeowners. This gap is a telling sign of the financial pressures faced by those who don't own property. It's not just about missing a payment; it's about the broader economic landscape that makes it harder for some to keep up with the Joneses—or in this case, the homeowners.
Consumer debt is another piece of the puzzle. It rose by 3.1% year-over-year, reaching a staggering $2.58 trillion. The average non-mortgage debt per consumer now stands at $22,147. For younger Canadians, particularly millennials and Gen Z, the situation is even more precarious. Their average non-mortgage debt climbed to $14,304, with a delinquency rate that jumped nearly 20% from last year. It's a tough time to be young and financially strapped, facing rising costs and job market uncertainties.
The affordability crisis is hitting younger consumers the hardest, according to Oakes. With employment uncertainty and limited access to affordable credit, many are finding it challenging just to stay afloat. It's like trying to swim against a current that's only getting stronger.
Homeowners aren't entirely off the hook either. Those who locked in lower mortgage rates during the pandemic's peak might find themselves in hot water as they renew their mortgages at higher rates. When budgets get tight, credit card payments are often the first to be missed. It's a domino effect that can lead to more financial stress down the line.
Ontario, particularly Toronto and its surrounding areas, remains a hot spot for financial distress. The province's 90-plus day delinquency rate is higher than the national average, partly due to its exposure to the tariff-hit auto and steel sectors. However, there's a glimmer of hope: the financial gap between homeowners and non-homeowners in Ontario peaked last year and is starting to narrow.
Meanwhile, TransUnion's recent report adds another layer to the story. It shows that consumer debt reached $2.52 trillion in the second quarter, up 4.4% from the previous year. Subprime consumers, those with lower credit scores, are feeling the pinch of higher living costs and are more likely to take on additional debt to make ends meet. For others, credit card balances are growing at a slower pace than inflation, suggesting a cautious approach to borrowing.
So, what does this all mean for the average Canadian? It's a reminder that while some financial indicators are stabilizing, the underlying issues remain. The divide between different consumer groups is a critical area to watch. As we navigate these uncertain economic waters, it's essential to stay informed and prepared for whatever comes next. Whether you're a homeowner, a renter, or somewhere in between, understanding these trends can help you make better financial decisions and, hopefully, avoid becoming part of next quarter's statistics.
