More Canadians battling financial distress amid rising costs, study finds
Mortgage delinquencies in the fourth quarter of 2023 increased 135.2 per cent in Ontario compared to the same period in 2022.
With low-interest rate mortgages taken during the pandemic coming due for renewal, the average monthly payment in the province increased by more than $680.
Windsor mortgage broker Joe Bondy said the average increase for local mortgage renewals is about $600.
“The average sized mortgage locally is $330,000,” he said. “With a 20-year amortization, you're looking at a monthly increase of $635. People are looking at about a three per cent rate increase at renewal compared to 2020 and 2021.”
The average monthly increase upon renewing a mortgage nationally was $457.
Depending on your situation, Bondy said a five-year, fixed rate can be had for 5.5 per cent or even closer to five. He said if rates drop to 4.5 per cent by summer, as many expect, that $635 per month increase would drop to $350 per month.
Bondy added the next three years will see the largest collective value of mortgages up for renewal in the nation's history. There are $300 billion worth of mortgages due in 2024 and $500 billion in each of the next two years.
“We have seen an increase in missed payments locally in the past three months,” Bondy said.
“I don't think we'll see a lot of people forced to sell their homes unless they're carrying a big mortgage. The rates are expected to come down, so that will help offset things.”
The Equifax Canada study showed the higher mortgage payments and inflation, combined with record levels of overall consumer debt, has resulted in a 76.5 per cent increase in the number of Ontario mortgage holders filing for bankruptcy. The national average has increased 23.2 per cent.
Despite the rapid rise in the past 12 months, the overall number of bankruptcies remains below pre-pandemic levels.
Higher mortgage payments are having a ripple effect through household finances. With housing costs consuming more of the monthly budget, Canadians are turning to credit cards and lines of credit.
That has resulted in consumer debt hitting a record high of $2.45 trillion in the final quarter of 2023.
“Cost of housing is the most significant factor in contributing to all this debt,” said Windsor-essex Regional Chamber of Commerce CEO Rakesh Naidu. “There are other things, inflation for one, but it's housing that's really causing this heartburn.”
Non-mortgage debt rose 4.1 per cent or $15.9 billion in the fourth quarter and totals $116.2 billion. Canadians are making smaller payments on those bigger balances and the percentage of people paying off their credit cards monthly has dropped from 66.1 per cent to 65.4 per cent.
More than 153,000 people missed making a credit card payment in 2023.
“The household debt is 1.5 times higher than 2022,” Naidu said. “You can see people borrowed more and tightened their belt hoping to ride things out. No one expected high interest rates to last this long.
“It's very concerning.”
The average personal debt in Ontario currently is $21,831 while Newfoundland residents carry the highest average debt at $23,930. The national average is $21,296.
The delinquency rate in the fourth quarter of 2023 increased most among those 26 to 35 years old (1.85 per cent) followed by 18 to 25 (1.67 per cent) and 36 to 45 (1.50 per cent).
The age groups with the highest average debt are those aged 46 to 55 ($33,327) and 56 to 65 ($27,209).
Naidu said businesses locally are feeling the impact of debt servicing eating up discretionary income. However, he's optimistic the local economy will rebound in the second half of 2024.
“One of the reasons I'm optimistic is the interest rates will go down,” Naidu said. “Our unemployment rate isn't significantly high, we're on the verge of a lot of job creation and our population is growing and that will lead to increased consumption. I expect our GDP will grow faster than at the provincial and federal levels.”