Mortgage volume fell in second quarter as credit card debt increased: Equifax

Canadian borrowers curbed mortgage borrowing in the second quarter while increasing non-mortgage debt.

That still led to overall debt levels hitting a new record high of $2.3 trillion in the quarter, up 8.2% from a year earlier, new data shows. EquifaxCanada.

Breaking it down, non-mortgage debt, such as car loans and credit card loans, rose 5.2% to $591 billion. The average non-mortgage debt carried by the average consumer is now $21,128, Equifax reported.

High inflation, which eased slightly to 7.6% in July from 8.1% in June, its highest level in 40 years, has pushed up the cost of living and is increasingly having an impact on consumer finances.

Credit card balances are now at their highest level since the fourth quarter of 2019.

“Financial stress is becoming a reality for many more Canadians,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada. “Its impact on consumer credit is not only visible in everyday credit card spending, but also in other non-mortgage debt like auto loans and lines of credit, where balances are on the rise. “

The volume of new mortgages, meanwhile, fell by 16.4% compared to the previous year. The average mortgage now stands at $367,500 in total and $430,700 among first-time buyers, Equifax said. In the high-priced markets of Toronto and Vancouver, average new mortgages exceed $600,000.

Lower prices do not translate into better affordability

For would-be buyers who were biding their time on the sidelines waiting for home prices to fall, the sudden rise in interest rates essentially negated any improvements in affordability.

Equifax’s report found that the average mortgage for first-time buyers was down just 0.5% from the first quarter, while the average monthly payment was up 10%.

“The cooling of the housing market in Canada should not be confused with increasing affordability,” Oakes said in a statement. “Affordability does not only depend on the price of houses, but also on the monthly payment obligations for a mortgage loan. Higher interest rates coupled with high inflation can really increase a consumer’s monthly outgoings, when many might struggle to qualify for a mortgage.

Consumer confidence is wavering

TransUnion Canada’s second quarter Consumer Pulse Study revealed growing concern among consumers about the state of their finances, with 41% saying their household finances are worse than expected (up 5% compared to last year).

A majority (63%) say they are “very” or “extremely” concerned about the current rate of inflation, with nearly half (48%) saying they have had to cut back on discretionary spending,

The study determined that up to 7.8 million Canadian consumers could have a “negative capacity” to absorb a $200 monthly increase in their cost of living based on their current payment habits and “could be unable to meet their credit obligations.”

“The implications of interest rate hikes and rising inflation are significant, with the rising cost of living driving higher credit balances as consumers borrow to fund day-to-day expenses,” he said. said Matt Fabian, director of research and financial services consulting at TransUnion.

“This, combined with rising debt service levels for mortgages, autos and personal loans, is creating a rapid increase in payment obligations beyond consumers’ control,” he added.