A report from Equifax Canada says missed credit payments were higher among younger Canadians in the second quarter due to the cost of living and unemployment.
Equifax says one in 17 Canadians aged 26 to 35 have missed a credit payment, compared to one in 23 in the general population.
The report says auto loan and line of credit default rates were also particularly high among younger Canadians, giving an idea of the financial pressures this age group faces.
Equifax says the rate of missed credit payments among Canadians aged 26 to 35 was 1.99% in the second quarter of 2024.
This represents an increase of 21.6% compared to the previous year.
The report said consumer debt reached $2.5 trillion, up 4.2% since the second quarter of 2023.
“Inflation is stabilizing and interest rates are starting to fall, which is good news for many consumers,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada.
“Unfortunately, rising unemployment has offset some of the positives and is adding to the financial stress,” she added.
Canada’s unemployment rate has been rising steadily, reaching 6.4% in July, according to Statistics Canada data, as high interest rates slow the economy.
Continued economic pressures are also pushing many young Canadians to return to live with their families.
“We see younger consumers staying at home longer, perhaps living with their parents. […] perhaps with their grandparents,” said Mr.me Oakes.
She added that the average income of younger consumers tends to be lower, with many of them new to the workforce or working part-time. “All of those things make it particularly difficult and harder for those people to weather the storm.”
Overall, the non-mortgage delinquency rate was 1.4%, surpassing 2020’s record levels and becoming the highest since 2011, the report said.
The report adds that credit card debt is the main driver of outstanding balances, at $122 billion, up 13.7 per cent year over year. The average Canadian had a credit card balance of more than $4,300 during the quarter, the highest level since 2007.
The slowdown in retail sales does not appear to have had an impact on outstanding credit card balances, the report notes. In the second quarter, retail sales fell 0.5%, according to Statistics Canada.
The delinquency rate for auto loans with balances over 90 days for nonbank lenders increased 26.8% from last year, while the delinquency rate for bank loans increased 13.7% from the previous year, the report said.
He notes that auto loan delinquency rates for non-bank auto lenders have reached an all-time high, while bank loan delinquencies have reached their highest rate since the pandemic.
High home prices and interest rates continued to create significant barriers for first-time residential property buyers, the report said.