Canadian Mortgage Delinquencies Rise 24%, Ontario Hits $1 Billion: Equifax

Canadian Mortgage Delinquencies Rise 24%, Ontario Hits $1 Billion: Equifax

Canadian households are finally starting to realize why so many agencies warned against borrowing so much debt. A new report from Equifax Canada shows more households are struggling to repay their super-sized debt loads. The agency notes the trend is amplified in more expensive regions, where delinquencies are rising faster than the national average. Even worse, early signs show this trend may be just getting started. 

Canadian Households Slow Down On Borrowing, But Growth Still Brisk

Canadians slowed their credit borrowing but still maintained a healthy pace. Outstanding household credit climbed 3.5% to $2.46 trillion at the end of Q1 2024. The vast majority of that debt was mortgage credit, representing 74% of the outstanding balance. If it sounds like a lot, that’s because it is—too much for many consumers to carry, from the sounds of it. 

Canadian Credit Delinquencies Rise, Households Flee Expensive Regions

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

Equifax specified Ontario’s balance of deliquent mortgages, those more than 90 days past due (DPD), exceeded $`1 billion in Q1 2024, the first time ever. They also shared data points regarding the most expensive real estate markets—Toronto and Vancouver.

“Notably, both Toronto and Vancouver now have higher delinquency rates (90+ day balance) than in Q1 2020,” read the agency’s report.  

The mortgage delinquency rate in Toronto climbed 5 basis points (bps) to 0.14% from Q1 2020 to Q1 2024. In Vancouver, the rate climbed 3 bps to 0.14% over the same period. 

Both BC and Ontario have now become so expensive, the flight from the regions became noticeable in 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 last 12 months, the number of individuals who moved from Ontario and British Columbia to other provinces exceeded those who moved to Ontario. Almost 71 per cent of all interprovincial movement to Alberta came from those two provinces alone.”

Not Just Mortgages, 1.26 Million Canadians Missed Credit Payments In The First Quarter

It’s worth remembering when households are low on cash, the mortgage is usually one of the last things they skip paying. Non-mortgage credit often provides earlier insight into household financial health. If that holds true, it isn’t painting a pretty picture. 

The number of consumers that missed a payment climbed 12.2% over the past year to 1.26 million people in Q1 2024. It was the highest level since 2020, and while missing a single payment isn’t a problem by itself, the risk of default rises as more payments are missed. 

Once again, this trend is amplified in the most expensive regions households have been fleeing. Missed payments for non-mortgage accounts saw higher annual growth in Ontario (+14.6%), BC (+13.4%), and Quebec (+15.2%), notes the agency. 

Higher interest rates are a contributor to rising delinquencies, with the record sharp climb recently made. Stress testing reduced the volume of expected delinquencies, but obviously wasn’t enough. The issue isn’t just confined to mortgage borrowers though, with non-mortgage borrowers also seeing a shock. Ultimately the trend boils down to the cost of living and the amount households have to borrow in order to survive.