Equifax: Young Canadians Falling Behind on Credit Payments

An Equifax Canada report indicates that younger Canadians faced higher rates of missed credit payments in the second quarter, attributable to living costs and unemployment.

Equifax reports that one out of every 17 Canadians between the ages of 26-35 missed a credit payment, compared to one in 23 overall.

The report highlights that delinquency rates for auto loans and lines of credit were notably elevated among younger Canadians, reflecting the financial strain experienced by this demographic.

Equifax notes that the rate of missed credit payments among Canadians aged 26-35 stood at 1.99 percent in the second quarter of 2024, marking a 21.6 percent increase from the previous year.

Furthermore, the report reveals that consumer debt levels surged to $2.5 trillion, reflecting a 4.2 percent rise since the second quarter of 2023.

Rebecca Oakes, Equifax Canada’s vice president of advanced analytics, mentioned, “Inflation is stabilizing, and interest rates are beginning to decrease, which is positive for many consumers. Unfortunately, the rise in unemployment has counteracted some of the benefits and is causing increased financial strain.”

Data from Statistics Canada shows that Canada’s unemployment rate has been steadily climbing, reaching 6.4 percent in July, as elevated interest rates hamper economic growth.

The ongoing economic challenges are compelling many younger Canadians to return to living with their families, as Oakes observed, “We are witnessing younger consumers staying at home longer, potentially residing with their parents or grandparents.”

Oakes further explained that younger consumers typically have lower average incomes, with many being new to the workforce or working part-time, making it challenging for them to navigate financial difficulties.

Overall, the non-mortgage delinquency rate hit 1.4 percent, surpassing 2020’s peak levels and marking the highest rate since 2011 as per the report.

The report also highlighted that credit card debt was the main contributor to outstanding balances, totaling $122 billion, marking a 13.7 percent increase year-over-year. On average, Canadians carried over $4,300 in credit card debt during the quarter, the highest level since 2007.

Despite a decline in retail sales, outstanding credit card balances remained unaffected, with retail sales dropping by 0.5 percent in the second quarter, according to Statistics Canada.

The report specified that the 90-plus-day balance auto loan delinquency rate for non-bank lenders surged by 26.8 percent from the previous year, while bank loan delinquencies rose by 13.7 percent compared to the prior year. Auto loan delinquency rates for non-bank lenders reached a historic high, whereas bank loan delinquencies attained their highest levels since the pandemic.

High home prices and interest rates continued to pose significant obstacles for first-time homebuyers, the report added.

Regarding the housing market, Oakes noted that despite a drop in interest rates, the housing market hasn’t shown signs of recovery, with sales far from the levels witnessed two to three years ago. It may take time for the market to stabilize, with the initial impact expected for homeowners renewing their mortgage this year.

Oakes highlighted, “We are starting to see the cohort of homebuyers who purchased during the pandemic when interest rates were extremely low. This situation presents a challenge for homeowners in particular.”

In 2024, the report indicated that 15 percent of renewals experienced monthly payment increases of over $300, up from eight percent in 2019.