Analyst notes certain geographies experienced higher stress given the numbers
The financial strain on Canadian households escalated in the first quarter of 2024, with missed payments on mortgages and other credit, returning to pre-COVID levels, according to a report by Equifax Canada.
In the first quarter of this year, over 1.26 million Canadians missed a credit payment, a 12.2% increase from the same period last year. Additionally, more than 34,000 Canadians missed a mortgage payment, marking a nearly 23% rise from the first quarter of 2023.
Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, attributed the increase to ongoing “challenging economic conditions.” She noted that Canadians have adopted strategies such as extending their mortgage terms to lower payments. “It’s not just homeowners feeling the strain. Whether you own or rent, the high cost of living remains a heavy burden for many,” Oakes said.
Despite a recent 25-basis-point interest rate cut by the Bank of Canada, Oakes suggested this reduction is unlikely to offer significant relief. “It's only really scratching the surface in terms of what it’s going to do to payments,” she explained. “It needs to go down at least a full percent, maybe, before there’s probably some meaningful impact to individuals.”
Regional disparities in financial stress
The report indicated that financial stress varies significantly across Canada. Ontario, British Columbia, and Quebec saw “above-average jumps” in missed credit payments, with increases ranging from 13% to 15%. In Ontario, the total of mortgage balances that were 90 days or more overdue, termed “severe delinquency,” exceeded $1 billion for the first time.
“When you look overall, the numbers aren’t terrible, but then when you start to look at certain geographies, you start to see a lot more stress coming through,” Oakes said, highlighting the high costs of owning or renting a home in major cities as a primary factor.
Impact on housing market and consumer spending
The Equifax report aligns with other recent studies showing that persistent financial stress and high costs have negatively impacted the housing market and large-scale consumer spending. According to Yahoo News, new mortgages fell to an all-time low in the first quarter of 2024, as consumers delayed major purchases amid speculation about further rate cuts. Nationally, mortgage refinancing levels dropped by 2.6% year-over-year, and first-time homebuyer volumes decreased by 10%.
Alberta saw a 10.6% year-over-year increase in new mortgage originations, which Equifax attributes to interprovincial migration driven by housing affordability issues. “As high home prices and reduced affordability continue in some geographies, more consumers are making the decision to relocate to more financially accessible regions,” Oakes said.
Over the past year, more people have moved from Ontario and British Columbia to other provinces than vice versa. Notably, 71% of all interprovincial migration to Alberta came from these two provinces.
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