More people report being unable to cover their bills and other financial obligations
Canadian households are finding it harder to manage their finances with prices still elevated and their level of borrowing piling pressure onto already stretched budgets.
The latest evidence of the struggles being faced comes from TransUnion’s Q2 2025 Consumer Pulse study, which finds that 27% of respondents report being unable to meet all their financial obligations despite the Bank of Canada cutting interest rates earlier in the year before pausing again.
Millions of households are still absorbing the effects of higher interest rates on mortgages, personal loans, and credit cards, while fixed-rate mortgage holders, in particular, face renewed payment shock upon renewal.
“We’re at a critical moment where many Canadians who took on mortgages during the pandemic, when interest rates were at historic lows, are now facing rising payments and affordability pressures,” says Matt Fabian, director of financial services research and consulting at TransUnion Canada. “With nearly $1.8 trillion in outstanding mortgage balances and 60% of mortgage holders up for renewal by 2026, millions could experience payment shock.”
Fabian adds that despite these challenges, Canadians continue to demonstrate financial resilience and are adapting their spending habits (almost half have cut back on discretionary spending in the past three months), prioritizing bill payments, and taking steps to help recession-proof their finances.
Economic volatility has remained top of mind for many Canadians as over half (51%) cite a recession as one of their top three financial concerns in the next six months.
The report shows that overall consumer credit balances remain relatively stable, but delinquencies are rising across multiple credit products. Notably, 90-day+ delinquencies increased year-over-year in the credit card and auto loan segments, suggesting that stretched borrowers are prioritizing certain payments over others.
However, even as their financial stress rises 22% of those who took part in the survey say they plan to take on additional credit in the near term to manage their expenses, which is both a short-term coping mechanism and a longer-term risk factor, especially as interest compounding accelerates and minimum payment burdens grow.
The share of Canadians who feel optimistic about their financial outlook has declined to its lowest point since early 2020 and many consumers are reporting anxiety about upcoming expenses, particularly those related to housing costs and debt repayments.
Among the key considerations for advisors:
- Review mortgage timelines. Fixed-rate renewals in the current rate environment may result in monthly payment increases of 20–40%, depending on the original term.
- Evaluate debt servicing ratios. Rising household debt-to-income ratios can mask deteriorating payment capacity.
- Encourage contingency planning. Clients should be encouraged to build or maintain emergency liquidity, reduce revolving debt, and consider refinancing options where appropriate.
- Monitor credit trends. Advisors with access to clients’ credit reports should watch for early signs of distress—such as increasing utilization or missed payments.
TransUnion’s findings underscore the importance of holistic financial planning in this environment. Advisors who help clients rebalance cash flow strategies and prepare for interest rate transitions can play a pivotal role in reducing financial fragility across the household sector.
The Bank of Canada’s next interest rate announcement is scheduled for July 30, 2025.
