Introduction
In recent months, an alarming trend has emerged in Canada’s real estate market. With mortgage payments on the rise, more Canadians are finding themselves under financial strain. According to the latest Equifax Canada credit trends report, rising mortgage delinquency rates have surged dramatically, particularly in Ontario and British Columbia. This post delves into the details of the report and what it means for homeowners and the economy.
Sharp Rising Mortgage Delinquency Rates
The Equifax report highlights a more than 50% increase in mortgage delinquency rates at the end of the previous year, compared to the year before. Ontario and British Columbia, known for their expensive housing markets, have seen rates soar by 135.2% and 62%, respectively. This spike has pushed delinquency rates above pre-pandemic levels, signalling a growing financial crisis for many homeowners.
The Worrying Trend of Bankruptcy Filings
Adding to the concern is the sharp rise in mortgage borrowers filing for bankruptcy. Across Canada, such filings have increased by 23%, but the figures are even more staggering in Ontario and British Columbia, where bankruptcies jumped by 76.5% and 46.5%, respectively. The prospect of renewing mortgages at significantly higher rates poses a considerable challenge, especially for those who secured historically low interest rates in 2020.
Payment Increases and Credit Performance
The report from Equifax sheds light on the financial impact of mortgage renewals. On average, individuals renewing their mortgages in the last quarter faced a payment increase of $457. In Ontario and British Columbia, the hikes were even more pronounced, exceeding $680. This has led to deteriorating credit performance among mortgage holders, particularly those experiencing payment increases of over $500 a month.
Beyond Mortgages: The Credit Card Dilemma
Equifax’s data also points to a troubling trend in non-mortgage debt, which rose by 4.1% in the final quarter, largely due to credit card usage. Interestingly, this increase is not attributed to higher consumer spending but rather to reduced payment levels. The report indicates that fewer Canadians are paying off their credit card bills in full, a trend most noticeable among high-balance variable-rate home equity line of credit (HELOC) users.
The Broader Impact: Living Costs and Financial Strain
The high cost of living continues to exert pressure across all consumer segments, contributing to a notable rise in non-mortgage delinquency rates. With over 153,000 more consumers missing payments on various credit products, the financial well-being of many Canadians is at risk. Factors such as inflation, credit card payments, and mortgage renewal anxieties are straining budgets to their limits.
Conclusion: Navigating the Financial Pinch
The findings from Equifax Canada highlight the increasing financial challenges facing Canadians, particularly in the realms of mortgage and non-mortgage debt. As living costs continue to escalate, finding strategies to manage financial obligations becomes crucial for homeowners and consumers alike. As a Mortgage Broker in the industry for 28 years, I urge you not to wait until the last minute to file bankruptcy or creditors proposal. There are various options available. Call me at 416-618-9312 or email me at maurice@sherwoodmortgagegroup for a chat. I may be able to offer you some advice.
Source: Equifax Canada Financial Post
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