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Credit Card Activity and Mortgage Growth Pushed Consumer Debt to $ 2.2 Billion

As we head into the holiday spending season, Canadians have upgraded their credit cards, which has helped bring overall consumer debt to $ 2.2 billion – yes, like billions of dollars.

But it’s not just the credit card business that adds to the increase in consumer debt, the growth in mortgage lending has also been a key driver, according to Equifax Canada latest report on consumer credit trends and information.

In the third quarter of 2021, increased lending activity along with growth in mortgage lending pushed aggregate consumer debt to $ 2.2 trillion, an increase of 7.8% over the previous year. third quarter of 2020. On an individual basis, average consumer debt (excluding mortgages) is now $ 20,739, down 1.7% from Q3-2020.

“The good news is that we have seen higher payments and a significant drop in non-mortgage consumer debt in 2020 due to government support mechanisms, increased savings levels and reduced debt. credit application, ”said Rebecca Oakes, associate vice president of advanced analytics at Equifax Canada. “Average non-mortgage debt is still lower than pre-pandemic levels, but has gradually increased throughout 2021.”

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New mortgage growth slowed in the third quarter, with a modest 7.7% year-over-year increase, unlike the last two quarters, which saw more than 20% growth in new mortgages compared to the pre-pandemic period.

However, the lower volume of mortgage loan growth has not resulted in lower loan amounts. According to the report, the average loan amount for new mortgages increased another 18.3% year-over-year and 1.4% quarter-over-quarter and now stands at 360 $ 000.

“Future movements in interest rates will not only impact consumers with short-term variable interest rate products, but could also put pressure on some homebuyers with fixed rate mortgages in the years to come. coming up, ”Oakes warned.

“Consumers who have taken advantage of very low rates over the past 18 months on high value mortgages may feel pressure at the end of their term when they have to renew their mortgage at a much higher rate. “

During the same period, Equifax said average monthly credit card spending per credit card holder was up 3.9% from the pre-pandemic period of Q3 2019, mostly attributable to young people. consumers under 35.

However, the growth in spending has not translated into an inability to pay off credit card balances; in fact, the average monthly payment per consumer has increased. For every dollar spent, consumers made payments of $ 0.97 in the last quarter, which means the impact on the overall card balance is still relatively small. Compared to Q3-2020, credit card balances are 1.9% lower.

Based on Equifax data for Q3-2021

The report contained positive news that 90-day-plus default rates for mortgage and non-mortgage products continued to decline in the third quarter of 2021, down 28.5% and 22.2% respectively, from the previous quarter. third quarter of 2020.

In total, average consumer debt (excluding mortgages) fell again this quarter to $ 20,739, a decrease of 1.71% year-over-year from the previous quarter. third quarter of 2020.

Based on Equifax data for Q3-2021

While default rates for both mortgage and non-mortgage products tend to decline, there are telling variations between cities and provinces. Most provinces and cities recorded a drop in mortgage delinquencies, with the exception of Toronto and Montreal.

Canada’s largest city posted a slight increase of 0.47% to $ 19,609 in average annual debt change from Q3-2020, while Montreal posted the largest increase with an increase of 2.15 % to $ 15,912 from the previous year.

“Government support has been a boon to many financially stressed consumers who have managed to repay their debts on time,” Oakes added.

However, Oakes said she expects there will likely be an increase in delinquency rates in the coming months, as government benefits ended in October for most consumers.

Written by
Ainsley smith

When Ainsley isn’t writing about real estate, local developments, and beautiful homes she would have liked to live in, you can usually find her exploring Toronto, cooking, exercising at home, or hanging out with her cat, Jerry Seinfeld.

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