Mortgage holders face steepest pressure as delinquencies surge in Ontario and BC
Canadian consumers are pulling back and managing debt more carefully, but the financial system is cracking under the weight of borrowers who can no longer keep up, according to a new report.
Total consumer debt reached $2.66 trillion in the first quarter, a 3.8% increase year-over-year, according to Equifax Canada's Q1 2026 Market Pulse report released today (May 26). But, non-mortgage debt actually shrank by more than $487 million (its first quarterly decline in several quarters) as Canadians appeared to spend less aggressively through the holiday season and then worked to pay down balances in the new year.
That restraint, however, sits alongside an insolvency rate that climbed to its worst level since 2009, up almost 19% year-over-year, a sign that a meaningful segment of the population has exhausted its financial cushion.
"The reduction in holiday spending at the close of 2025 translated into lower seasonal balance increases on credit cards," said Rebecca Oakes, vice president of advanced analytics at Equifax Canada. "This discipline enabled many Canadians to pay down balances during the first quarter, representing a critical shift in how consumers are navigating the current macroeconomic climate."
Homeowner insolvency
Homeowner insolvency volumes jumped more than 11% from the fourth quarter of 2025, with more than 90% of those filers opting for consumer proposals rather than outright bankruptcy. The average non-mortgage debt carried by insolvent mortgage holders reached $82,400 in Q1, up 19% from two years ago — a sharp escalation that underscores how housing costs are compounding broader financial strain.
While the national 90-plus-day mortgage delinquency rate by volume, at 0.22%, remains below pre-pandemic benchmarks, the balance delinquency rate climbed 32% year-over-year to 0.28%. In Ontario, mortgage delinquencies jumped 52% year-over-year. British Columbia saw a 36% increase.
Credit card originations fell to a four-year low, driven in part by slowing population growth as immigration programs pulled back, reduced consumer confidence, and tighter lending standards from financial institutions contending with more missed payments. Where new cards were issued, lenders cut average limits for higher-risk applicants by 15 to 20%, while extending modestly higher limits to borrowers with strong credit scores.
"Several factors could be driving a decline in new credit card openings in Canada," Oakes explained. "First is the cooling of population growth as immigration programs have slowed. Second, and perhaps more telling, is uncertainty in consumer financial confidence that triggers a shift toward spending less and saving more. Finally, lenders may be tightening their adjudication strategies to counter rising missed payments and economic uncertainty. All three of these factors are converging simultaneously, likely impacting new credit openings."
The auto market added to the picture of softening demand. New captive auto loans fell nearly 5% year-over-year to a three-year low, and bank instalment loan volumes dropped 9.5%. Lower vehicle prices offered some relief, but insurance premiums, maintenance costs, and fuel expenses continued to weigh on affordability calculations.
"While lower vehicle prices are certainly a positive for consumers, they are just one piece of the affordability puzzle," Oakes noted. "When you consider the substantial increases in insurance premiums, along with rising maintenance and fuel costs, it seems clear why Canadians are being more cautious before committing to a new vehicle purchase."
Older Canadians held back by mortgages
Among age cohorts, Canadians 25 and under showed the most encouraging trend in years. Both the balance and volume of 90-plus-day delinquencies fell year-over-year for the first time since mid-2022, declining 2.2% and 1.5% respectively. Consumers in the 26-to-35 bracket, by contrast, saw delinquency rates move in the wrong direction, with balance delinquency up 6.75%.
The data on older Canadians reflected a divide driven almost entirely by mortgage status. Seniors without a mortgage are accelerating debt repayment and increasing spending simultaneously — credit card payoff rates hit 52.3% for the 55-to-65 group and 62.6% for those 65 and older. For seniors still carrying a mortgage, the dynamic reversed sharply, with restricted cash flow forcing cutbacks on both spending and debt service.
Provincially, Quebec, Nova Scotia, Saskatchewan, and New Brunswick showed measurable improvements in non-mortgage delinquency metrics, while Ontario, British Columbia, and Manitoba continued to deteriorate.
With significant volumes of mortgages still set to renew through the remainder of 2026, the pressure on household balance sheets is unlikely to ease quickly.
"While the mortgage renewal wave is expected to slow towards the end of 2026, the transition to significantly higher interest rates continues to fuel financial impact and payment pressure," Oakes said. "Consequently, ongoing monitoring of debts remains essential for Canadians."
