While many Canadians have benefited from rate cuts, others are having a harder time financially

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This article was published 26/11/2024 (318 days ago), so information in it may no longer be current.

Staying current with debt management was a mixed bag for Canadians in the third quarter, according to the latest Equifax Market Pulse Consumer Credit Trends Report that will be released today .

While many Canadian benefited from the Bank of Canada interest rate cuts, the post-pandemic run of recent high interest rates and inflation has caught up with some new Canadians and others who are new to credit.

Kathy Catsiliras, Equifax Canada’s vice-president data and analytics, said the current round of interest rate cuts this year has had a positive impact on many.

“It (the interest rate cuts) actually brought some good news for once,” she said.

“It is really improving things for many Canadians from a financial perspective.”

Consumer debt reached $2.54 trillion in the third quarter in Canada, a four per cent increase from the same period last year, with the non-mortgage debt per active credit consumer up 3.8 per cent from the third quarter of 2023.

The average non-mortgage debt for Canadians was $21,810, up $796 from the same quarter last year.

Manitobans’ average debt total was $18,086, the lowest in the country.

Non-mortgage debt delinquency rates in Manitoba were at 1.63 per cent in Manitoba, compared to 1.43 per cent nationally.

But Catsiliras said new Canadians and younger people just starting their credit history are having a harder time.

It’s perhaps not surprising since there was a spike in immigration in 2021 and 2022 when interest rates and inflation were on the rise.

“Many new Canadians arrived in the last couple of years when the financial environment was plagued with high interest rates and high inflation,” said Catsiliras. “This specific cohort has had to rely on more credit to establish themselves.”

She said as they wracked up more debt during that time, the interest rate cuts are not having an impact on their financial position yet.

Equifax found that while delinquency levels started to flatten out for some consumer segments, newcomers, or consumers new to credit (credit active for 12 to 36 months) saw the biggest rise in missed payments.

One in 22 consumers from those groups missed a credit payment in the third quarter this year compared to one in 28 last year.

Brent Berzuk, chief risk officer with Access Credit Union, said they are seeing year-over-year delinquency rates relatively flat this year.

“Although they sometime spike in the fourth quarter when there is more financial pressures because of holiday spending,” he said.

Berzuk said in 2023 delinquencies were higher than in 2022, but he believes they are already smoothing out to historical norms.

“We had a drop when rates were around two per cent (before the pandemic) when there was historically low delinquencies,” he said. “They have edged back up to normal. It was good to see from last year to this year that there was no continuing spike. It has flattened out.”

Equifax, which would know better than most, notes that historically newcomers have demonstrated strong credit performance in the first few years of being in the country.

But Rebecca Oakes, the company’s vice-president of advanced analytics, said “Rising unemployment levels combined with high inflation in the last few years has likely added significant financial pressure to this group.”

The company, which operates around the world, is starting to more aggressively market a program that allows newcomers to leverage their credit rating from their home country, called Global Consumer Credit Files.

Catsiliras said: “Wherever we have a footprint we will leverage our ability to bring that credit information for newcomers to Canada and create that bridge. We believe no one should be excluded.”

martin.cash@freepress.mb.ca