Canadian consumer debt surges as mortgage costs mount

Future payment shocks for homeowners are "a real concern", report says

Canadian consumer debt surges as mortgage costs mount

Canadian consumer debt spiked by 6.2% in the last quarter of 2022 compared to the same time the previous year as rampant inflation and higher borrowing costs take their toll on household finances, according to a new report.

In its latest Market Pulse consumer credit trends and insights study, credit reporting agency Equifax revealed consumer debt sat at $2.37 trillion in Q4 last year, with mortgage debt accounting for 75% of that debt even as new mortgage originations continue to slow.

Higher overall debt loads were especially apparent in the millennial cohort, with Canadians aged between 27 and 42 seeing non-mortgage debt spike by 8.4% on a year-over-year basis.

Equifax said new mortgage originations were down 38.5% compared with 2021’s fourth quarter, with Toronto and Vancouver – two of the country’s most frenzied housing markets during the height of the COVID-19 pandemic – seeing the most striking declines.

In Toronto, average new mortgage amounts were down by $51,000, while Vancouver saw a decline of $36,000 – with volumes falling by 44.3% and 52.3% respectively, year over year.

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Meanwhile, the average mortgage holder across the country is paying almost $170 more in monthly mortgage payments than before the pandemic, according to the survey, with that figure only expected to rise further.

Home equity line of credit (HELOC) products have seen minimum monthly payments spike by 24% since the beginning of the pandemic, Equifax said.

Those are worrying trends, according to Equifax Canada’s vice president of advanced analytics Rebecca Oakes, particularly for borrowers facing renewal over the next year.

“As more mortgages come up for renewal, future payment shocks for homeowners are a real concern,” she said.

“There are thousands of fixed-rate mortgages expected to be renewed in the next 12 months and this will likely lead to either an increase in the monthly mortgage payments for these consumers, or a need to extend mortgage terms to maintain existing payment levels.”