Economic pressures could impact Canadians' credit scores, especially young consumers: Equifax report

Delinquencies rising for young consumers

Within the Equifax report, the average credit card balance continued to grow despite a slowdown in consumer spending. — rising to $4,300, the highest level since 2007. This increase was primarily attributed to a reduction in card pay rates, with consumers under 35 years of age seeing the fastest decline in card payment levels. The rise in credit card balance for consumers of all ages was more significant for mortgage holders, where the average credit card balance jumped by 11.9% compared to Q2 2023, while non-mortgage consumers saw a 7.7% increase.

The high cost of living and the unemployment rate reaching (now at 6.4%) are contributing to higher levels of missed payments, with one in 23 consumers missing a payment on at least one credit product in Q2 2024.

Overall, the non-mortgage balance delinquency rate sat at 1.4%, surpassing peak 2020 levels and the highest since 2011 — rising 23.4% compared to Q2 2023. Missed payment rates for younger consumers aged 26–35 remained the highest at 1.99%, up 21.6% from Q2 2023. The delinquency rate for auto loans (1.45%) and lines of credit (2.19%) in this age group were particularly high, reflecting the broader financial pressures faced by this demographic.

While overall mortgage balance delinquency rates remained lower than pre-pandemic (0.16% vs. 0.17% in 2019), mortgage balance delinquency rates in Ontario hit their highest levels (0.16%) since 2014 (0.18%). Over 3,000 mortgages ($1.3 billion in balance) in Ontario were in severe delinquency at the end of Q2, up 66.8% when compared to Q2 2023.

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Economic pressures from all angles

These economic pressures also mean young people are staying at home longer than previous generations. Almost one in three Canadian households (29.2%) include adult children living with their parents, up from 26.7% a decade ago. In Ontario, this trend is even more pronounced, with 32.8% of households comprising multiple generations under one roof.

For those that want to move, buying their first home is more difficult than ever. The proportion of first-time buyers continued to decline compared to pre-pandemic levels, with the average first time home buyer loan exceeding $410,000. The Equifax report noted more buyers are opting for longer amortisation terms — some exceeding 25 years.

In 2024, 15% of renewals saw monthly payments rise by over $300, up from 8% in 2019. In Ontario and B.C., this figure was around 20%, prompting many to extend their amortisation terms to manage the higher costs.

Q2 also saw growing concern for the credit performance of vehicle loans. Auto loan delinquency rates for non-bank auto lenders reached a historic high, while bank loan delinquencies were at the highest levels since 2019.

The 90+ day balance delinquency rate for non-bank auto loans was 1%, up 26.8% from 12 months ago, while bank loan delinquency rate was at 1.16%, up 54.1% from 12 months ago.

“The economic conditions we’re seeing today may be leading many young people to stay at home longer,” added Oakes. “With fewer job opportunities, soaring rent prices, high housing prices, and the high cost of living, young Canadians are increasingly relying on the support of their parents and grandparents.”