The number of Canadians missing monthly payments on non-mortgage bills is on the rise, according to an Equifax report, as consumers continue to sink further into debt.
Credit monitoring agency Equifax said in a report released Tuesday that in the first quarter of the year 175,000 more Canadian consumers missed payments on at least one non-mortgage product, including credit cards, vehicles, unsecured lines of credit and home equity lines of credit . That’s up 19 per cent compared to the same period last year, and brings the total of Canadians who missed payments on non-mortgage products to 1.1 million.
In the previous quarter, most of the missed payments were among lower income and younger consumers who didn’t have mortgages. But Rebecca Oakes, vice president of advanced analytics at Equifax Canada, said this quarter’s increase marks a shift where more of the consumers missing monthly debt payments are homeowners.
“We’re starting to see more missed payments coming through for consumers who have a mortgage,” Oakes said in an interview with Yahoo Finance Canada. “We think this really is linked a lot more to rising interest rates and the impact on consumers as they’re coming up to the end of their fixed term period of the mortgage and are starting to look at renewals.”
“When consumers with a mortgage begin to see a bit of a challenge in their finances, they tend to miss payments on things like loans and credit cards before their mortgage payments, and that’s what we’re seeing come through.”
According to the Bank of Canada, one-third of mortgage holders have already seen payments increase compared to February 2022, before the central bank started aggressively hiking its benchmark interest rate. The central bank has estimated that the median monthly payment increase for homeowners facing mortgage renewals will be about 20 per cent, putting a strain on some household finances.
At the same time, Canadians’ credit card debt continues to soar, with balances jumping 14.5 per cent compared to last year, Equifax said. The average monthly spend per credit hard holder has topped $2,200 in the quarter. Oakes said that increased brought Canadians’ total credit card debt to more than $101 billion. The $100 billion threshold was passed for the first time in the last quarter of 2022.
“It’s starting to level off a bit, but credit card spending is still up,” Oakes said. The biggest increase was among consumers who pay less than 90 per cent of their balance per month.
“There are definitely consumers who are struggling. It’s not widespread, but you’re seeing it in pockets.”
Total consumer debt, which includes mortgages, hit $2.37 trillion, a nearly 5 per cent increase from the same time last year. That came even as the mortgage market experienced a slowdown due to rising interest rates and a slowdown in the housing market.
“While interest rates and cost of living remain high, we expect to see more groups of consumers experiencing financial difficulties over the coming months,” Oakes said.
“It will be important for consumers to monitor and anticipate these escalating costs to help them weather the storm.”
Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.
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