Mortgages driving growth in overall consumer debt

Despite the slowing of credit-use by Canadian consumers on some fronts due to the COVID-19 pandemic, overall consumer debt continues to grow — and the main driver is a resurgent mortgages market.

That’s the finding of the latest Equifax Canada report on consumer credit conditions. According to the report, Canadian consumer debt in Q2 2020 rose 2.8% from the same quarter last year, reaching just short of $2 trillion.

As home sales rebounded nationwide from March-April lows, average debt per person is now at $73,532, up 2.2% from the same time last year. This trend is in sharp contrast to other forms of credit like credit cards, auto loans and lines of credit, which have fallen in use during the pandemic.

“Mortgage activity has withstood the headwinds from COVID and showed the earliest signs of recovery,” said Rebecca Oakes, assistant vice president of advanced analytics at Equifax Canada, in a statement.

What also appears to be a clear trend is that Western Canada is more in debt than the rest of Canada. While non-mortgage debt loads are down across the board, Equifax found that the western region average debt in Q2 ($25,063) significantly outpaced that of the eastern region ($22,782).

In fact, the three provinces with the highest debt averages — Alberta ($28,261), British Columbia ($24,289) and Saskatchewan ($23,984) — are all in the west. The same is reflected in the statistics found in major cities, where Calgary ($28,890), Edmonton ($27,571) and Vancouver ($25,940) led the list of places where personal debt levels are highest.

In an interview, Oakes said the numbers reflect a combination of factors.

“Typically, the non-mortgage debt in the west is higher, and that’s driven a lot by lines of credit primarily,” Oakes said. “What we do see is the average cost for lines of credit in the west is 40-50% higher than what you can get in the east. So the debt level tend to be higher in the western side of the country.”

Oakes said that, on the current-events side of things, the impact of a struggling oil-and-gas sector is even clearer on the delinquency rate side of the equation. According to the Equifax report, delinquency rates in Eastern Canada actually fell by 3.28% in Q2; in the West, however, it grew by 12.63%.

“Obviously, there are different industries that support the West versus the East,” she said. “In Alberta, when you have changes in oil prices, that tends to have a knock-on impact on what happens with delinquency and lines of credit. So you can see the volatility of certain industries making an impact.”