Consumer debt in Canada reached a record $2.5 trillion in the third quarter, driven by high living costs and rising unemployment. Newcomers and consumers who borrowed money for the first time in the past 12 to 36 months saw the biggest rise in missed payments compared to the same consumer group last year, according to Equifax’s report.
Rising unemployment levels combined with high inflation in the last few years have likely added significant financial pressure to this group. Over 1.3 million consumers missed a credit payment in the third quarter, up 10.6% from a year ago.
TransUnion reported that total consumer credit debt rose 4.1% in the third quarter year-over-year as more gen Z consumers entered the credit market, making them the fastest-growing segment to carry an outstanding balance. About 45% of the total household debt in Canada is held by millennial and gen Z consumers, who hold $1.1 trillion in outstanding balances.
Auto loans were one of the biggest drivers of rising consumer debt, with non-bank auto loans up 12% and bank auto loans up 2.7% year-over-year in the third quarter. TransUnion forecasts auto loan sizes in 2025 will remain flat as lower interest rates offset high average vehicle costs, while overall auto delinquencies are expected to improve slightly next year.
Average credit card balances are expected to grow 3.9% to $3,320 among prime and above consumers by the end of the year next year.
Source: Financial Post
Source: The Star
