Canadian mortgage delinquencies rise 24%, Ontario hits $1 billion: Equifax – Better Wellness

Canadian households are finally beginning to understand why so many agencies warned against borrowing so much debt. A new report from Equifax Canada shows that more families are struggling to pay off their super debt. The agency notes that the trend is reinforced in more expensive regions, where delinquencies are rising faster than the national average. Even worse, early signs indicate that this trend may be just the beginning.

Canadian households’ borrowing slows, but growth is still brisk

Canadians slowed their credit borrowing, but still maintained a healthy pace. Outstanding household debt rose 3.5% to $2.46 trillion at the end of the first quarter of 2024. The vast majority of this debt was mortgage loans, representing 74% of the outstanding balance. If it sounds like a lot, that’s because it’s too big for many consumers to carry, from the sounds of it.

Canadian loan delinquencies rise, families flee expensive regions

Canadian loan delinquencies are rising, with the most expensive regions facing the most pressure. The agency did not disclose the national delinquency rate, but specified that it is lower than pre-pandemic levels. The firm believes the mortgage stress test introduced in 2016 is helping to mitigate some of the issue, but overall some regions are too indebted and expensive to avoid setting delinquency benchmarks.

Equifax specified that Ontario’s delinquent mortgage balance, those more than 90 days past due (DPD), exceeded $1 billion in the first quarter of 2024 for the first time ever. They also shared data points about the most expensive real estate markets – Toronto and Vancouver.

“In particular, Toronto and Vancouver now have higher delinquency rates (balances over 90 days) than in the first quarter of 2020,” the agency’s report read.

The mortgage delinquency rate in Toronto increased by 5 basis points (bps) to 0.14% from the first quarter of 2020 to the first quarter of 2024. In Vancouver, the rate increased by 3 basis points to 0.14% during the same period.

Both BC and Ontario have now become so expensive that flight from the regions became visible on credit files. “As high home prices and reduced affordability continue in some geographies, more consumers are making the decision to relocate to more financially accessible regions,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada.

Further noting, “In the past 12 months, the number of individuals who moved from Ontario and British Columbia to other provinces exceeded those who moved to Ontario. Almost 71 percent of all interprovincial movement in Alberta came from only from these two provinces.”

Not just mortgages, 1.26 million Canadians missed loan payments in the first quarter

It’s worth remembering that when families are tight on cash, the mortgage is usually one of the last things they default on. Non-mortgage credit often provides an early insight into a family’s financial health. If this is true, it is not a pretty painting.

The number of consumers who missed a payment increased by 12.2% over the past year to 1.26 million people in the first quarter of 2024. It was the highest level since 2020 and while missing a single payment is not a problem in itself, the risk of default increases. as more payments are missing.

Once again, this trend is reinforced in the more expensive regions where families have fled. Missed payments on non-mortgage accounts saw the highest annual growth in Ontario (+14.6%), BC (+13.4%) and Quebec (+15.2%), the agency notes.

Higher interest rates are a contributor to the rise in delinquencies, with record sharp increases recently. Stress testing reduced the volume of expected delinquencies, but it was clearly not enough. However, the issue is not limited to mortgage borrowers, with non-mortgage borrowers also seeing a shock. Ultimately, the trend comes down to the cost of living and how much households need to borrow to survive.

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