Despite a fall in mortgage activity, Equifax Canada reports that an increase in borrowers helped bring overall consumer debt to $2.36 trillion in the third quarter, up 7.3% from the same period previous year.
According to the report, average non-mortgage debt increased to $21,183, the highest level since the second quarter of 2020, and credit cards and auto loans are starting to feel the strain.
The total amount of non-mortgage debt was $599.9 billion, up 5.3% from the previous year and 1.9% from the third quarter of 2019, while the total number of borrowers increased by 3.1%.
According to Rebecca Oakes, head of advanced analytics at Equifax Canada, the increase in debt is the result of a mix of pent-up consumption, growth from immigration, and increasing borrowing as consumers struggle with growing living expenses.
Spending on credit cards reached a record-high level for the quarter, jumping 17.3% from the previous year.
Nearly $2,447 was spent on credit cards on average, up 21.8% from the third quarter of 2019.
All consumer sectors, including the sub-prime segments, have seen a surge in credit card usage and new cards being issued, according to a statement from Oakes.
Insolvencies and delinquencies might increase in ’23: Equifax
The average payment rates for individuals who hold a balance have decreased from a year ago, according to Oakes, who claimed there are some indications that borrowers are beginning to struggle to pay their payments.
“Consumers have been making good payments, but we are beginning to observe a shift in payment behaviour, especially for credit card revolvers—those who carry a balance on their card and don’t pay it off completely each month.”
Auto loan default rates have also begun to rise, particularly for those opened after the end of 2021, she claimed.
Although insolvencies are still far lower than pre-pandemic levels, the aggregate rate of non-mortgage debt that was more than 90 days past due increased to 0.93 percent from 0.87 last year.
When compared to the same period last year and the third quarter of 2019, new mortgage volume decreased by 14.9% and 22.7%, respectively. For nearly the same loan amounts that first-time buyers did a year ago, first-time buyers are paying over $500 more.