Rising housing costs and rising wages continue to fuel the Bank of Canada’s inflationary concerns. Meanwhile, on the ground…
By making the decision to continue the pause and maintain its key rate at 5%, the Bank of Canada noted in particular that the slowdown in the economy reduces inflationary pressures for a growing range of goods and services. To then add: “However, the increase in housing costs has increased, reflecting the faster growth of rents and other costs of housing, as well as the continued contribution of high mortgage interest. »
Moreover, in its reading for the month of October, Statistics Canada was not without noting that the cost of mortgage interest and rent continued to be the factors contributing the most to the increase in consumer price index (CPI) from one year to the next. Added to this ranking is the increase in the price of food purchased in stores. Over a longer period, the Food component of the CPI showed an increase of 10.4% in October compared to its March 2022 level and that of housing, of 10%, compared to a jump of 6.5% in the all-items CPI. In Quebec, we are talking about a jump of 12.3% and 11.4% respectively, compared to 7.5% for the overall CPI.
On the employment side, the central bank takes note of the fact that labor market conditions continue to ease. To then qualify: “That said, salaries continue to increase by 4 to 5%. »
Higher debt
Meanwhile, in the realm of monetary austerity, the mortgage renewal shock has been extensively documented. More broadly, Equifax Canada took stock of the financial stress of individuals and households, to highlight a phenomenon of increased omission of payments now spilling over into mortgage loans. In its third quarter Market Pulse report, we observe a 3.5% increase in total consumer debt in Canada compared to the corresponding quarter of 2022.
From the second to the third quarter, mortgage debt increased by 1.7% — despite average monthly payments on new loans increasing by 10.4% — and non-mortgage debt increased by 1.2%. The latter comes mainly from the credit card segment, with total balances reaching $113.4 billion, “an all-time high that represents an increase of 16% compared to the same period last year. More than 6 million new cards have been issued over the past 12 months, an increase of 13.7%. »
Certainly, the strong demographic growth is part of the explanation, with more than 1.3 million new card holders over the year. However, the average balance per card increased from $3,727 to $4,119 in the meantime, “thus exceeding the averages observed before the pandemic”. Equifax adds that consumers with a credit score below 620 notably experienced a substantial increase of 13.9% in credit card balances compared to the third quarter of 2022, and 9.4% compared to the period before. the pandemic.
“While average monthly credit card spending per consumer increased by 2.2% compared to 12 months ago, the average payment increased by only 1.7%,” adds the credit rating agency. credit. The rise in the cost of living, higher interest rates and the economic slowdown cannot be unrelated to this increase in debt.
Omissions on the rise
Especially since payment omissions are on an upward trend. The percentage of Canadians who have not made a payment in 90 days for at least one credit product increased from 3.2% to 4%, with more than 139,000 more consumers missing a payment compared to 12 years ago. month.
The overall rate of arrears related to balances (excluding mortgage loans) increased to 1.2%, up 29.2% compared to the third quarter of 2022. By province, Quebec ranks third with a year-over-year increase of 33.9%, compared to 35.4% in Ontario and 34.5% in British Columbia.
Auto loans and unsecured lines of credit continued to see the largest rebound in missed payments since the lows of the pandemic, with balances 90 days or more past due surpassing rates seen in 2019. For arrears linked to credit cards, the increase reached 15.8%. “Behavior related to credit card payments can be a major indicator of financial difficulties. The percentage of card users sticking only to minimum payments increased 3.4% in the third quarter, while the percentage paying their balance in full decreased 1.5%,” Equifax points out.
Pressures on housing
On the other hand, in the housing market, mortgage arrears remained, overall, well below the rates observed before the pandemic. Although pressures may be observed among first-time buyers and those who renewed last year, for the moment, these omissions are the result of regional differences, with serious mortgage payment delays being most noticed and pronounced in Ontario and British Columbia. British with increases of 122.2% and 46.2% respectively year-on-year. However, excesses are to be feared.