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Credit card debt ballooned to a new record in the third quarter as a higher cost of living squeezes Canadians and causes more people to miss loan payments, including their mortgages.

Money owed on credit cards climbed to a new high of $113.4 billion in the third quarter of 2023, up 16 per cent from last year, according to Equifax Canada’s latest credit trends report. More than six million new credit cards were opened in the past 12 months, Equifax said, an increase of 13.7 per cent from last year.

Overall, total consumer credit, which includes credit cards, mortgages, auto loans and unsecured lines of credit, hit $2.4 trillion in the third quarter. That’s a $80.9-billion increase from the same time last year, Equifax said.

Credit cards are becoming a go-to for many people struggling to cover mounting living costs fuelled by interest rates at 20 year highs. Equifax said a cooling economy is only adding to the financial difficulty.

“The increase in credit card debt is being driven by several factors, including the rising cost of living, higher interest rates and the economic slowdown,” Rebbecca Oakes, a vice president at Equifax Canada, said. “These factors are putting a strain on household budgets, making it difficult for many Canadians to make ends meet.”

Strong population growth is also contributing to higher credit card debt levels. New card holders increased by more than 1.3 million compared to last year. But credit card balances are also rising at a faster clip, suggesting financial pain is behind much of the growth in credit card debt levels, Equifax said. The average credit card balance climbed to $4,119 in the quarter, compared to $3,727 last year, higher than balances before the pandemic.

“Even if we take into account the increased cost of goods due to inflation, the growth in card balance compared to last year is still substantial,” Oakes said.

All that financial strain is leading more Canadians to miss their debt payments. More than 139,000 additional people failed to make a payment on time in Q3 compared to last year, and the percentage of those who missed at least one bill rose to one in 25. That percentage was one in 31 during the pandemic.

Mortgage borrowers, especially first-time homeowners or those who renewed their mortgages over the past year, are starting to fall behind on their loans. Such delinquencies are more pronounced in Ontario and British Columbia, where missed payments are up by 122.2 per cent and 46.2 per cent, respectively, from last year.

Overall, missed mortgage payments are still lower than they were pre-pandemic, but Equifax expects more pain ahead. The Bank of Canada has signalled interest rates may need to stay higher for longer, which will push mortgage payments higher come renewal time.

“With many upcoming mortgage renewals, consumers need to prepare for potential payment shocks,” Oakes said.

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The benchmark price of homes in the Toronto region declined in November and new listings fell month over month as elevated interest rates continued to cast a chill over activity.

Monthly data released by the Toronto Regional Real Estate Board (TRREB) on Dec. 4 showed the composite benchmark selling price was $1,081,300, a decline of two per cent from October. On a seasonally adjusted basis, benchmark prices were down 1.7 per cent, the fourth consecutive month of declines. The average selling price, meanwhile, decreased by 2.2 per cent to $1,082,179 month over month, well off the year’s monthly high of $1,195,521, set in May.

There were 4,236 total sales in November, down nine per cent from October, and more than six per cent from the previous year. New listings dipped 27 per cent from the previous month but were up nearly 20 per cent from a year ago.

• The Bank of Canada will announce its latest interest rate decision at 10 a.m. ET. Policymakers are expected to hold the key rate at five per cent amid evidence the economy is slowing.
• Nick Stavropoulos, Ontario’s acting auditor general, will release his 2023 annual report. The report will be available online at auditor.on.ca.
• Today’s data: Canadian labour productivity, merchandise trade balance; U.S. ADP national employment report, productivity, goods and services trade balance, global supply chain pressure index
• Earnings: Campbell Soup Co., Gamestop Corp.

Get all of today’s top breaking stories as they happen with the Financial Post’s live news blog, highlighting the business headlines you need to know at a glance.

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• Canada’s housing woes won’t be solved by attacking perceived evils through the tax system

An estimated US$84.4 trillion will pass from baby boomers to their heirs and favoured charities by 2025. But talking about an inheritance before you get it is often taboo and, subsequently, harder to plan for. We asked financial planners Ed Rempel and Eliot Einarson to help one couple develop a retirement plan with and without their expected inheritance.

Today’s Posthaste was written by Victoria Wells, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com.

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