Mortgage payments holding up, but other debt arrears rising: StatCan
Canadians are managing to keep up with their mortgage payments in the face of higher interest rates, but a new Statistics Canada analysis suggests there are cracks forming on other kinds of debt.
The agency released a report Wednesday tracking how debt levels changed from pre-COVID-19, through the pandemic and into the ensuing economic rebound, up until late 2023. It also captures the impacts of rising interest rates as the Bank of Canada sought to tame decades-high levels of inflation.
Overall levels of non-mortgage debt — credit cards and auto loans, for example — declined during the early months of the pandemic as lockdowns across the economy convinced many Canadians to save up and pay off loans.
But since the economy reopened in force around 2022, Canadians have returned to borrowing: debt levels have risen since then, “ultimately wiping out the previous effects,” StatCan said in the report.
While the report said “several factors” could explain the rise in debt, StatCan pointed to the surge in annual inflation, rising to a peak of 8.1 per cent in June 2022, making the cost of living higher for Canadians.
StatCan noted that lower-income Canadians were particularly vulnerable to decades-high levels of inflation, typically having less savings and with more of the household budget going towards essentials and fewer discretionary purchases they could cut back on. This may have made these households more reliant on credit card debt to accommodate sudden price shocks, the agency said.
As of last year, non-mortgage debt was higher than its pre-pandemic level in Canada, hitting $553.1 billion in the third quarter of 2023, 13.7 per cent higher than in the first quarter of 2020.
StatCan pointed to a rising population — and more
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