The rising cost of living is driving more Canadians into debt, with reports from Equifax and TransUnion revealing an alarming increase in missed loan and credit card payments.
Consumer debt reached a record high of $2.5 trillion in the third quarter of 2024, marking a 4.1% rise compared to the same period last year. Alongside this, the number of serious delinquencies—accounts overdue by 90 days or more—has climbed by nearly 2%.
“Many consumers are struggling to stay current on their payments, leading to a rise in delinquencies,” said Matt Fabian, researcher and consultant with TransUnion.
Younger Canadians Feeling the Pinch
TransUnion noted that Millennials and Gen Z consumers, spanning their teens to early 40s, are among the hardest hit. The combination of high housing costs, inflationary pressures, and elevated interest rates is creating financial strain.
“The cost of living and borrowing has surged, making debt repayment significantly more challenging,” Fabian explained.
Challenges for Newcomers and Credit Novices
Equifax’s findings highlight additional difficulties faced by newcomers to Canada and those new to credit. The report revealed a 10.6% year-over-year increase in missed credit card payments during the third quarter, with 1.3 million Canadians missing payments.
Rebecca Oakes of Equifax expressed concern: “Newcomers are accumulating debt faster than anticipated and struggling to meet payment obligations sooner than expected.”
Implications of Missed Payments
With the holiday shopping season underway, experts urge Canadians to prioritize staying current on their payments. Missed payments can lead to higher borrowing costs, difficulty accessing new credit, and a decline in credit scores.
“Delinquent accounts can make it harder to secure credit or obtain favorable interest rates in the future,” Oakes warned.
Vehicle Loans on the Rise
Despite financial challenges, lower interest rates have spurred a nearly 3% rise in bank loans for vehicle purchases compared to last year. Loans from non-bank sources have surged by 12%, underscoring Canadians’ reliance on alternative financing options.
As the economic landscape evolves, the reports emphasize the importance of financial planning and timely debt management to mitigate the impact of rising living costs and borrowing expenses.