More Canadians missing payments

Equifax reports 19% increase in people not paying monthly bills like credit cards, vehicle loans

A growing number of Canadians are missing monthly payments on nonmortgage bills as consumers slip further into debt amid high interest rates and a rising cost of living, according to a report from Equifax released on Tuesday.

The credit monitoring agency said in its latest consumer credit report that 175,000 more consumers missed payments on at least one nonmortgage product such as credit cards and vehicle loans in the first quarter of the year — a 19 per cent increase from the first quarter of 2022.

While at the end of 2022, missed payments were more pronounced among nonmortgage holders, the first quarter of 2023 also saw an increasing number of mortgage holders missing payments on nonmortgage debt — a15.7 per cent hike from the same time last year, according to Equifax.

“At the end of last year, younger and lower income individuals were showing increased difficulty in making payments,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, in a statement.

“We are now starting to see more homeowners struggle as well, especially following mortgage renewals where payments have risen significantly.”

When more consumers with a mortgage fall back on payments of other bills and credit cards, it creates a concerning ripple effect, says Doug Hoyes, co-founder of personal insolvency firm Hoyes, Michalos & Associates Inc.

People always pay their mortgage first if they can, Hoyes explained, but with the high cost of living and interest rates, it might make it harder for consumers to pay off other bills like credit cards.

“The report shows an increasing number of borrowers are getting to the breaking point,” Hoyes said. “And when enough people get to the breaking point there’s greater defaults. Banks eventually have to start foreclosing on houses which obviously makes real estate prices go down and that’s when it’ll be obvious that we are in recession.”

In its annual review last month, the Bank of Canada said it was more concerned now than a year prior over Canadians’ ability to handle their debt and the risks posed by that debt.

While about a third of mortgages have seen an increase in payments compared with February 2022, just prior to the Bank of Canada’s recent rate hiking campaign, nearly all borrowers are expected to face higher payments by 2026.

And mortgage payments could spike by as much as 40 per cent by 2026 for those on variable-rate mortgages with fixed payments, while those with fixed-rate mortgages could see payments rise by 20 to 25 per cent over 2022 levels.

Meanwhile, Equifax said in Tuesday’s report that credit card debt continues to rise. On average, consumers are spending 21.5 per cent more each month on their credit cards compared with pre-pandemic levels, the agency reported.

‘‘ We are now starting to see more homeowners struggle as well, especially following mortgage renewals.

REBECCA OAKES VICE-PRESIDENT OF ADVANCED ANALYTICS AT EQUIFAX CANADA