First National Financial LP

Residential Market Commentary - Debt and delinquencies up, but under control

  • First National Financial LP

A strong rebound in the housing market has helped push Canadian consumer debt to nearly $2-trillion.

Credit monitoring firm Equifax says consumer debt rose 2.8% in the second quarter, compared to the same period in 2019.  Equifax says slower mortgage paydowns, refinancing, deferrals, better sales and high prices have propped-up mortgage debt levels. 

At the same time consumer, non-mortgage, debt has dropped.  Not surprisingly, consumers reduced their use of credit cards, lines of credit and auto loans during the economic slowdown caused by the coronavirus pandemic.

Also, not surprisingly, the use of credit support mechanisms, like mortgage deferrals, have been wide spread during the pandemic.  Equifax says more than three million consumers are using, or have used, some form of payment accommodation since February.

Consumers in the 35 to 44 year-old age group have been the heaviest users of deferrals, with a little more than 15% seeking payment accommodations.  However, their debt load shrank by nearly 4%.

“Everyone’s situation is different.  Some consumers who were feeling financial stress prior to the pandemic are showing improved credit behaviour since March and may be leveraging deferrals to assist in paying down outstanding debts,” says Equifax’s Rebecca Oakes.

“There remains a group that is feeling the financial stress of the pandemic and is reporting more missed payments,” added Oakes.

Delinquencies – payments that are 90-days or more overdue – have increased, but remain low.  The 35 to 44 year-olds showed an 11% rise in delinquencies, but that pushed the rate to just 1.4%.    

The important first-time buyer cohort – the 26 to 35 year-olds – saw their debt drop by 3.3%.  Their delinquency rate jumped about 8.4%, and stands at 1.7%.

Equifax credits payment deferrals and government supports, such as CERB, for keeping delinquencies low.