A report shows Canadians with auto loans faced challenges as car-loan debt for those borrowing outside of a bank jumped 12 per cent year-over-year. Cars sit on the lot at a dealership in Bowmanville, Ont. on Jan. 22, 2022.Doug Ives/The Canadian Press
Consumer debt and delinquency in Canada continued to rise in the third quarter of the year, despite lower interest rates easing pressure on some pockets of the population, a new credit-bureau report says.
Fuelled in large part by vehicle loans, national consumer debt reached $2.54-trillion in the third quarter – a 4-per-cent increase from last year – with average non-mortgage debt climbing 3.8 per cent from the same time last year, according to Equifax Canada figures released Tuesday. Meanwhile, overall credit-card debt was up 9.4 per cent year-over-year, hovering at $4,388 on average.
“We’ve been seeing delinquencies rise for quite some time, and that’s still really because we’ve had high cost of living, high inflation, high interest rates,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, in an interview.
Canadians with auto loans particularly faced challenges, as car-loan debt for those borrowing outside of a bank jumped 12 per cent year-over-year. Vehicle loans from a bank went up almost 3 per cent in the third quarter.
“We’ve seen vehicle prices being really high. That kind of came off the back of the pandemic, with supply chain issues … and then you had really super high interest rates as well,” Ms. Oakes said.
Anne Arbour, a financial educator with the Credit Counselling Society, said part of the issue might be the change in auto-loan structures over the years.
“Auto loans used to be for four years, five years, they’re now seven years,” she said. “That means you’re carrying that debt over a longer period of time.”
Affordability challenges also continued to drive up consumer debt and missed payments in certain parts of Canada. Ontario and B.C., the two provinces weathering the biggest affordability crises, saw the percentage of mortgages where payment was missed for 90 or more days rise by 36 per cent and 3 per cent from 2019.
The good news, Ms. Oakes said, is that some of those macro-level pressures are easing.
Lower interest rates have alleviated financial pressure for mortgage holders outside of Ontario and B.C. The growth in mortgage delinquencies slowed considerably, dropping to a 9.5-per-cent increase year-over-year in the third quarter of 2024 from an 11.7-per-cent increase in the second quarter.
Consumers with car loans are also expected to see some reprieve. Recent Autotrader findings showed that the average price of used cars on its site dropped to $36,342 in June – an 8-per-cent decrease year-over-year.
But declining interest rates are not a “silver bullet,” said Francisco Remolino, a Toronto-based insolvency trustee: “High inflation over the past year has left many Canadians relying on credit to cover basic expenses, and this debt lingers even as inflation eases.”
Newcomers to Canada, and consumers new to credit, experienced the biggest spike in missed credit payments. One in 22 consumers in this group missed a payment in the third quarter, up from one in 28 the previous year.
Steve Vanderherberg, vice-president of community programs at WoodGreen Community Services, which supports newcomers among others, said newcomers often have a lack of credit history and are more likely to turn to high-interest and predatory lending products when financially strapped.
Despite the lingering challenges for some, Ms. Oakes said debt and delinquencies may be steadying: “We’re seeing insolvency levels start to stabilize, spending’s pulled back – we’re starting to see the signs of kind of light at the end of the tunnel.”
But headwinds remain: Elevated unemployment and looming mortgage renewals at higher rates will present challenges for many Canadian households. A November report from the Canada Mortgage and Housing Corporation showed that about 1.2 million mortgages are up for renewal in 2025 – and 85 per cent of those signed when the Bank of Canada rate was at 1 per cent or lower.
“There’s going to be a lot of consumers who took out their mortgage at super low rates during the pandemic, and they’re going to come up for renewal next year,” Ms. Oakes said. “There still could be some payment shocks to come.”
