Equifax: Mortgage Borrowing Sends Canadian Consumer Debt to $2.1 Trillion

Consumer debt loads have risen dramatically over the past quarter despite declining credit card use, as Canadian households allocate more of their income towards mortgage borrowing.

According to the latest data published by Equifax Inc, new mortgage borrowing jumped 41% in the first three months of the year compared to the same period in 2020. The average amount for which borrowers were approved for also rose in the first quarter, increasing by more than 20% to $326,930.

The escalation in size and number of mortgages Canadian households are taking on has pushed Canada’s outstanding consumer debt levels to almost $2.1 trillion, despite credit card balances falling to a six-year low. “Lower interest rates, multiple lockdowns and higher unemployment rates have led to changes in consumer behavior,” explained Equifax assistant vice president of advanced analytics Rebecca Oakes. “Competition among home buyers is fierce in many markets across the country.”

The Covid-19 pandemic has ignited a historic boom in the real estate market, as record-low interest rates, coupled with flexible work arrangements have accelerated the demand for more spacious housing. In addition, the sporadic lockdowns in response to fluctuating waves of Covid-19 have given Canadian households limited opportunities to spend their income on other goods and services, such as entertainment and dining.

Aside from the surge in mortgage borrowing, the amount of consumer debt in Canada declined 4.2% in the first quarter of 2021 compared to year-ago levels, to an average of $20,430. At the same time, Equifax data showed that non-mortgage delinquencies fell 22% during the same period.

Information for this briefing was found via Equifax. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.