Canada’s household debt hits new record

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Canadians are piling on the debt as interest rates come down, with the younger generations leading the way.

Consumer credit debt in Canada rose to a record $2.5 trillion in the third quarter, up 4.1 per cent from the year before, according to reports from two credit reporting agencies out today.

About 45 per cent of that debt is held by millennial or gen Z consumers who range in age from early 40s to teens. Gen Z consumers are the fastest growing segment of the population carrying an outstanding balance, said TransUnion’s quarterly report.

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With the number of Canadians using credit rising and interest rates decreasing, there has been a spike in new borrowing, which grew 5.3 per cent from the year before.

Subprime or riskier borrowers have seen the biggest increase, mainly because more consumers have suffered a drop in their credit score as they struggled to make payments, said TransUnion.

Missed payments and serious delinquencies rose in the third quarter with Alberta leading the provinces with a serious consumer delinquency rate of 2.21 per cent. Ontario showed the biggest rise in delinquency.

Another report by Equifax Canada found that newcomers to Canada and new credit customers are showing the most strain.

Consumers who have been credit active for 12 to 36 months saw the biggest rise in missed payments, with one in 22 missing a payment in the third quarter.

“Historically newcomers have demonstrated strong credit performance in the first few years of being in the country,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada. “However, rising unemployment levels combined with high inflation in the last few years has likely added significant financial pressure to this group.”

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The TransUnion Credit Industry Indicator dropped for the fifth month, indicating a deterioration in the health of the credit market, but there is more optimism about the future as interest rates come down and the economy improves.

“Delinquency rates are a lagging indicator, and we expect that lowering inflation combined with interest rate reductions may provide a relief valve for some struggling consumers,” said Matthew Fabian, director of financial services research and consulting at TransUnion Canada.

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Close but no cigar.

Bitcoin came within US$300 of US$100,000 Friday before the rally sparked by Donald Trump’ election stalled. The digital currency has now dropped about 6 per cent to trade at US$94,000 this morning.

“People have been looking for an excuse to take some profits,” Adrian Przelozny, chief executive of crypto exchange Independent Reserve, told Bloomberg. “We’re still very confident the current bullish market sentiment will continue into 2025.”

Read more on where bitcoin goes from here.

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• Bank of Canada deputy governor Rhys Mendes is scheduled to speak on the role of monetary policy at Greater Charlottetown Area Chamber of Commerce in Prince Edward Island today.
• Today’s Data: United States new home sales, consumer confidence, S&P CoreLogic home price index
• Earnings: Best Buy Co Inc, Dell Technologies Inc., HP Inc.

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Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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