Credit card

Financial stress rises, demand for credit cards and debt increases

TORONTO, Sept. 06, 2022 (GLOBE NEWSWIRE) — Total consumer debt soared to $2.32 trillion, an 8.2% increase in Q2 2022 from a year ago, according to the most recent Market Pulse consumer credit trends and outlook report from Equifax Canada. Rising new loans and higher inflation-related spending pushed non-mortgage debt to $591.4 billion, up 5.2% from Q2 2021. Average non-mortgage debt per consumer is now $21,128, an increase of 2.4% over Q2 2021.

“The cost of living has increased across Canada and indeed around the world, with rising inflation seen in essentials like housing and energy as well as many other goods and services,” said Rebecca Oakes , Vice President of Advanced Analytics at Equifax Canada. “Financial stress is becoming a reality for many more Canadians. Its impact on consumer credit is not only visible in everyday credit card spending, but also in other non-mortgage debt like auto loans and lines of credit, where balances are on the rise.

Credit card demand and balances continue to rise
During the last quarter, credit card balances reached their highest level since the fourth quarter of 2019 and increased by 6.4% compared to the first quarter figures. missing payments. Credit card balances for consumer segments with a credit score below 620 increased by 7.4% compared to the first quarter of 2022 and showed an increase of 16.2% compared to the second quarter of 2021. Credit scores generally range on a scale of 300 to 900, the higher the better. . Scores of 600 and above would be considered good by most lenders.

“Credit card spending is at historically high levels,” Oakes added. “Strong consumer demand for credit cards means a competitive market for lenders. Consequently, the credit limits offered on the new cards are much higher than what we have seen in previous periods. »

The average credit limit on new cards is over $5,800, the highest in seven years. Average monthly credit card spend per consumer cardholder was nearly $2,370 in Q2, up $427 (22%) from Q2 2021. New card volume is also up one quarter to quarter with an increase of 16.2% compared to the last quarter.

The housing market slowdown had little impact on the amount of new mortgages, but monthly payments are on the rise
New mortgage volume fell 16.4% in Q2 2022 from highs in Q2 2021. High home prices impacted affordability for all consumers, but particularly homebuyers. first house. Although the slowdown in price growth is positive, the average loan size of first-time buyers fell only 0.5% this quarter compared to the previous quarter, but their average monthly payments increased by 10%.

The average loan size for new mortgages in Canada remained high at $367,500, with average loans for first-time home buyers at $430,700. In Toronto and Vancouver, the average loan size for first-time home buyers exceeded $600,000, despite some price correction in those markets.

“The cooling of the housing market in Canada should not be confused with an increase in affordability,” Oakes said. “Affordability does not only depend on the price of houses, but also on the monthly payment obligations for a mortgage loan. Higher interest rates coupled with high inflation can really increase a consumer’s monthly outgoings, when many might struggle to qualify for a mortgage.

High car prices drive up average auto loan amounts
Overall, new auto loan originations are down year over year. However, the subprime and deep subprime segments are beginning to see an increase in new issuance with increases of 1.2% and 4.1% in new auto loans and bank comparable loans* compared to the second quarter of 2021. The high prices car loans continue to push the average size of car loans ($28,000) and comparable loans ($33,000) up 4.8% and 10% respectively, compared to the same period last year.

Financial stress indicators on the rise
In the second quarter, consumer insolvency reached the highest levels since the start of the pandemic. This was mainly due to consumer proposals, which were up 20.7% over the previous year and accounted for 76% of all insolvencies.

An increase in the number of credit accounts with missed payments led to a 4% increase in delinquency rates for accounts over 90 days. This is the third consecutive quarter where an increase has been observed. However, strong growth in overall non-mortgage debt combined with a decline in the average balance of overdue accounts masked some of the emerging financial stress, with 90-plus-day balance default rates still remaining below levels. pre-COVID and showing a decrease from the previous year. .

“The good news is that government and lender support in 2020 and 2021 has resulted in an overall reduction in debt levels. Account balances where we see consumers starting to miss payments are lower than those where there are 12 months ago,” Oakes said. “The not so good news is that more than 100,000 more consumers missed a credit payment this quarter compared to last year. About one in 30 people using credit have defaulted on at least one credit commitment.

Credit cards and auto loans are seeing the largest increase in account-level delinquencies with respective increases of 5% and 5.9% from last quarter.

Regional variations in delinquency are also visible in the Prairie provinces, with Manitoba and Saskatchewan showing an increase in both account and balance delinquency rates. The delinquency rate for non-mortgage accounts 90 days and older increased from last quarter, by 6.1% in Manitoba and 5.8% in Saskatchewan. Insolvency rates are also up 4.3% from Q1 2022 for the western provinces.

“Rapidly rising inflation and interest rates are clouding the economic outlook. Early indications from our data suggest that financial strains are beginning to emerge; Canadians should continue to be mindful of their spending and debt,” Oakes advised.

Age group analysis – Debt and delinquency rate (excluding mortgages)

Medium
Debt
(Q2 2022)
Change in average debt
Year after year
(Q2 2022 vs. Q2 2021)
Delinquency rate ($)
(Q2 2022)
Default Rate ($) Change
Year after year
(Q2 2022 vs. Q2 2021)
18-25 $8,071 -3.92 % 1.38 % 9.47 %
26-35 $17,138 3.62 % 1.28 % -7.64 %
36-45 $25,703 4.70 % 0.97 % -10.65 %
46-55 $32,155 4.11 % 0.72 % -11.07 %
56-65 $26,652 2.17 % 0.65 % -9.01 %
65+ $14,610 0.49 % 0.77 % -6.81 %
Canada $21,128 2.36 % 0.88 % -7.92 %

Analysis of major cities – Debt and delinquency rate (excluding mortgages)

Town Medium
Debt
(Q2 2022)
Change in average debt
Year after year
(Q2 2022 vs. Q2 2021)
Delinquency rate ($)
(Q2 2022)
Default Rate ($) Change
Year after year
(Q2 2022 vs. Q2 2021)
Calgary $24,912 -1.71 % 1.11 % -7.92 %
Edmonton $24,345 -1.17 % 1.35 % -7.69 %
Halifax $20,990 -0.66 % 0.95 % -14.05 %
Montreal $16,422 4.64 % 0.75 % -9.03 %
Ottawa $18,893 3.67 % 0.78 % -9.06 %
Toronto $20,361 5:30 p.m. % 1.04 % -10:45 a.m. %
Vancouver $22,760 3.88 % 0.65 % -10.52 %
St. John’s $23,675 -1.28 % 1.07 % -17.26 %
Fort McMurray $37,640 -0.98 % 1.49 % -10.18 %

Provincial analysis -Debt and delinquency rate (excluding mortgages)

Province Medium
Debt
(Q2 2022)
Change in average debt
Year after year
(Q2 2022 vs. Q2 2021)
Delinquency rate ($)
(Q2 2022)
Default Rate ($) Change
Year after year
(Q2 2022 vs. Q2 2021)
Ontario $21,405 4.37 % 0.83 % -8.93 %
Quebec $18,429 2.80 % 0.59 % -4.45 %
New Scotland $20,701 -1.21 % 1.14 % -10.00 %
New Brunswick $21,888 -2.09 % 1.21 % -12.75 %
PEI $22,239 1.11 % 0.81 % -5.54 %
Newfoundland $22,909 -0.98 % 1.15 % -14.41 %
eastern region $21,641 -1.31 % 1.14 % -11.84 %
alberta $25,056 -1.84 % 1.25 % -7.91 %
Manitoba $16,956 0.11 % 1.15 % 5.05 %
Saskatchewan $22,582 -0.59 % 1.26 % 0.06 %
British Columbia $21,940 2.96 % 0.77 % -8.55 %
Western region $22,599 0.49 % 1.04 % -6.84 %
Canada $21,128 2.36 % 0.88 % -7.92 %

* Comparable bank loans are installment loans with limits between $5,000 and $100,000
** Based on Equifax data for Q2 2022

About Equifax
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics and technology company, we play a vital role in the global economy by helping financial institutions, businesses, employers and government agencies make critical decisions with greater trust. Our unique blend of differentiated data, analytics and cloud technology generates insights to support decisions to move people forward. Headquartered in Atlanta and supported by more than 13,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia-Pacific region. For more information, visit Equifax.ca.

Contact:
Andrew Find Later
SELECT Public Relations
[email protected]
(647) 444-1197

Heather Aggarwal
Equifax Canada Media Relations
[email protected]