As the cost of living continues to rise and unemployment rates soar, a recent Equifax Canada report sheds light on the financial challenges faced by younger Canadians. The report reveals a disturbing trend of missed credit payments among Canadians aged 26-35, indicating the mounting pressure on this demographic.
Key findings from the report include:
- Increase in Missed Credit Payments: In the second quarter of 2024, one in every 17 Canadians aged 26-35 missed a credit payment, compared to one in 23 overall. This suggests a higher prevalence of financial instability among younger Canadians.
- Delinquency Rates on Auto Loans and Lines of Credit: The report highlights particularly high delinquency rates on auto loans and lines of credit among younger Canadians, pointing to the significant financial strain they face.
- Consumer Debt Levels: Consumer debt levels in Canada have soared to $2.5 trillion, marking a 4.2 per cent increase since the second quarter of 2023. This surge in debt underscores the financial challenges many Canadians are grappling with.
Rebecca Oakes, vice-president of advanced analytics at Equifax Canada, commented on the current economic landscape, stating, “Inflation is stabilizing and interest rates are starting to reduce, which is good news for many consumers. Unfortunately, rising unemployment has offset some of the positives and is driving increased financial stress.”
The report also highlighted the following concerning trends:
- The non-mortgage delinquency rate reached 1.4 per cent, surpassing peak levels in 2020 and the highest since 2011.
- Credit card debt soared to $122 billion, up 13.7 per cent year-over-year, with Canadians carrying an average credit card balance of over $4,300.
- Auto loan delinquency rates for non-bank lenders surged by 26.8 per cent, while bank loan delinquencies increased by 13.7 per cent year-over-year.
Moreover, the report pointed out the challenges faced by first-time homebuyers due to high home prices and interest rates. Oakes emphasized the prolonged impact on consumers renewing their mortgages, particularly those who purchased homes during the pandemic when interest rates were at historic lows.
Despite a slight drop in interest rates, the housing market remains sluggish, with sales far below pre-pandemic levels. Oakes predicted a slower normalization of the market, indicating potential financial implications for homeowners, with 15 per cent of renewals experiencing significant increases in monthly payments.
In conclusion, the Equifax Canada report paints a grim picture of the financial hardships faced by many Canadians, especially the younger demographic. As economic pressures continue to mount, proactive measures and financial literacy are crucial to navigating these challenging times. It is imperative for individuals to assess their financial situations, seek advice when needed, and plan for a more secure financial future.
