Canadian consumer debt hits record $2.64 trillion as mortgage stress mounts

Canadian consumer debt reached a record $2.64 trillion in the second quarter of 2026, with borrowing growing faster than the number of people actually using credit. Existing holders carried larger balances than a year earlier, according to TransUnion's Q2 2026 Credit Industry Insights Report (CIIR) released this month.

Total outstanding balances rose $116.7 billion, a 4.6% year-over-year (YoY) increase, while the number of credit-active Canadians expanded more modestly to 32.5 million, up just 1.1% from the same period in 2025.

The divergence signals that higher debt loads are accumulating among existing borrowers rather than reflecting a broader expansion of credit users.

Super prime borrowers saw balances rise 6.5% YoY to $1.74 trillion, while subprime balances climbed 5.9% YoY to $62.0 billion.

Canadians carrying non-mortgage debt owed an average of $28,118 in Q2 2026, up 7.6% from a year earlier, led by auto loan growth of 7.9%, followed by lines of credit at 7.4%.

"Credit growth in the second quarter reflected a widening divide across risk tiers. Super prime, prime plus and prime consumers continued to increase non-mortgage borrowing, while subprime consumers modestly reduced balances year over year, pointing to a more cautious borrowing environment among higher-risk households," said Matt Fabian, senior director of financial services research and consulting at TransUnion Canada.

"For lenders, this underscores the potential value of differentiated strategies: prudent expansion in lower-risk segments and close monitoring of subprime performance."

Read more: Behind Canada's debt slowdown, one province still struggles

Mortgage originations cool as affordability bites

New mortgage originations increased 7.8% YoY in Q2 2026, a marked deceleration from the double-digit growth posted in recent quarters.

TransUnion attributed the slowdown to persistent affordability challenges, economic uncertainty, and cautious buyer sentiment despite some improvement in housing market conditions.

The average balance on a newly issued mortgage fell 2.4% YoY to $354,683, suggesting buyers either opted for lower-priced homes, brought larger down payments, or targeted more affordable markets.

Meanwhile, total outstanding mortgage balances rose 3.9% to $1.93 trillion, even as the number of active mortgage accounts dipped 0.2%.

The average outstanding mortgage balance rose 4.2% to $293,270, driven largely by the legacy of higher loan amounts originated in prior years and ongoing renewals.

Delinquency rates remained low overall: 99.7% of mortgage holders were current on payments in Q2 2026. That said, the share of serious mortgage delinquencies — defined as 60 or more days past due — edged higher, with balance-level delinquency rising six basis points YoY to 0.31%.

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Provinces and insolvencies tell a sharper story

Ontario recorded the most pronounced deterioration provincially, with account-level mortgage delinquency rising six basis points and balance-level delinquency climbing 10 basis points YoY.

British Columbia followed with a seven basis point rise at the balance level. Alberta, Saskatchewan, and several Atlantic provinces, by contrast, held steady or improved.

"Although mortgage delinquency rates remain low nationally, signs of credit stress are concentrated in higher-cost housing markets, where borrowers tend to carry larger mortgage balances and face greater exposure to affordability pressures and payment shocks," Fabian said.

"Provincial results suggest the recent rise in mortgage delinquencies is driven less by broad borrower distress and more by localized weakness in Canada's most expensive markets, particularly Ontario and British Columbia."

Beyond delinquency, the consumer insolvency rate climbed to 1.10% in Q2 2026, up from 0.94% in Q2 2024, the highest level recorded in the past two years.

The increase was driven predominantly by non-mortgage holders: insolvency rates among Canadians without a mortgage have edged above pre-pandemic levels, while homeowners remain comparatively resilient.

Consumer proposals accounted for approximately 80% of all insolvency filings in the quarter, consistent with a trend toward structured debt restructuring rather than outright bankruptcy. 

"The dominance of consumer proposals is somewhat reassuring, as it suggests more consumers are seeking debt restructuring rather than defaulting outright. The key question for the second half of 2026 is whether economic normalisation can ease that pressure," Fabian said.

Canada's Credit Industry Indicator (CII) rose to 100.9 in Q2 2026, half a point above the previous quarter and two points above a year earlier, suggesting conditions are stabilising rather than expanding strongly.

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