Despite inflation and rising delinquencies, new mortgages soared 51% in early 2025
When consumers feel confident in their financial security and the state of the economy, they may feel able to take on extra borrowing. But for others, loading up on debt is a necessity amid the high cost of living.
Providing a snapshot of the Canadian credit market is TransUnion’s Q2 2025 Credit Industry Insights Report which shows a mixed picture including a notable surge in mortgage activity, even as the engine of inflation continues to dictate debt trends.
Meanwhile, total consumer credit balances climbed to $2.52 trillion in the second quarter, up 4.4% year-over-year, dropping to 3% once inflation is taken into account and translating to a real increase of about $80 billion.
While overall consumer balances have grown roughly 7% since early 2022, non-mortgage debt has actually declined by 10%, hinting that the rising cost of homes is squeezing space for discretionary borrowing.
Notably, this debt contraction hasn’t been evenly distributed with super-prime borrowers’ inflation-adjusted balances dropping nearly 33%, while subprime consumers saw their balances grow by 15%, a clear sign that those in tighter financial straits are resorting to extra credit to bridge the gap.
“Subprime consumers are more likely to feel the impact of higher costs of living and may choose to take on additional debt, such as credit card balances, to help cover the costs of goods and services,” says Matt Fabian, director of financial services research and consulting at TransUnion Canada. “For other risk tiers of borrowers, their card balance growth has been less than the rate of inflation, indicating that these consumers are less reliant on credit cards to maintain purchasing power.”
Nationally, average consumer non-mortgage debt balance in Q2 2025 was $26,845, up almost 3% year-over-year. But regionally, PEI ($29,677) and BC ($29,082) still report the highest average debt levels, with annual increases of 5.5% and 3.6% respectively. Quebec ($23,131) and Manitoba ($21,216) have the lowest but saw this grow by 3.0% and 3.9% year-over-year respectively.
TransUnion reports that mortgage originations jumped 51% year-over-year in Q1 2025, reaching $82.6 billion with the upswing fueled by lower interest rates and regulatory relief introduced in 2024 and driven largely by younger buyers. Millennials accounted for 41% of new mortgages, while Gen Z, though smaller in volume, posted the fastest growth at 66% YoY.
Housing affordability remains a concern though with the average new mortgage size up 6.9% to $368,432. In BC, the average hit $503,435 and in Ontario it rose to $458,124, both comfortably above the national average, reflecting the scorching prices in Vancouver and Toronto.
Looking ahead, over two million mortgage renewals between 2025 and 2026 looms large, many of which were locked in at ultra-low rates near 1%. As those rates reset, average monthly payments rose about 4.7%, adding more than $100 per month to household expenses.
That strain is already reflected in serious delinquencies (60+ days past due), which inched up to 0.27%, up 3 basis points from last year. Meanwhile, overall 90+-day delinquency across all products reached 1.77%, a 4-basis-point rise from Q2 2024, but still in line with pre-pandemic norms.
The situation varies sharply by province: Alberta had the highest delinquency at 2.29% (up 11 bps), while Quebec remained the lowest at 1.27%, despite a slight 3 bps increase.
“This increase in delinquency is expected” given greater credit activity, TransUnion noted, and Fabian cautioned that “the Canadian credit market remains fragile,” especially as renewals accelerate and regional pressures mount. He urged financial institutions to adopt “proactive risk management strategies and support consumers through this transitional period”.
Finally, the Consumer Credit Industry Index (CII) slipped to 98.8 in Q2, down 1.4 points from Q1 and down 6 points year-over-year as a mark of continued consumer caution as spending softens and credit usage wanes in the face of mounting economic uncertainty.
