Posthaste: Never mind the mortgage cliff, this is the debt Canadians are really struggling with

Remember those warnings about Canadians falling off the

mortgage cliff

when the rock-bottom borrowing of the pandemic came up for renewal at much higher rates.

That cliff turned out to be of more of a “curb” as

one observer put it

, and the people who are struggling the most with debt these days, according to the latest surveys, don’t even have a mortgage.

An Equifax Canada report out this week found that close to 1.4 million Canadians missed a credit payment in the second quarter. That’s actually down a touch since the first quarter, but still 118,000 higher than a year ago.

However, the number of people who missed a payment who don’t have a mortgage are nearly double the number who do.

“While the overall delinquency rate appears to be levelling off, the underlying story is far more complex,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada.

“We continue to see a growing divide between mortgage and non-mortgage consumers — and continued financial strain among younger Canadians, who are facing a

slower job market

and rising costs.”

Canadians under 36 appear to be facing the most financial difficulties. The delinquency rate for this age group jumped almost 20 per cent from a year ago and average non-mortgage debt rose to $14,304.

“This demographic is currently reporting some of the highest delinquency levels for both

credit cards

and auto loans,” said the study.

Equifax says spending levels have increased among those without a mortgage, while homeowners spent less on their credit cards.

Credit card balances hit a record $113.3 billion in June, according to data released by Statistics Canada yesterday, and total non-mortgage credit liabilities reached $793 billion, up $29 billion from the year before.

The Credit Counselling Society said the Canadians reaching out to its service for help are now carrying bigger debt loads. The average unsecured debt load rose to $34,400 in June, up 14 per cent from last year.

“The affordability crisis seems to be hitting younger consumers the hardest,” said Oakes. “Between rising costs, employment uncertainty, and limited access to affordable credit, many are struggling just to stay afloat.”

Ontario, especially the Great Toronto Area and Hamilton, showed the sharpest increases in missed payments in the country. Equifax says this reflects the high cost of living in these regions and exposure to the auto and steel industries which are now being hit by

U.S. tariffs.

Delinquency rates also rose in Alberta, where people without a mortgage are showing greater financial stress than their neighbours with mortgages, said Oakes.

Equifax expects credit performance to remain a key issue for young consumers well into the second half of the year.

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Housing starts

in Canada jumped to 294,000 in July, beating economic forecasts. The gains were driven by multi-unit construction, while single-family housing starts remained flat.

The biggest building boom is in Montreal where housing starts are up 50 per cent year to date over last year,

said Kari Norman

, an economist with Desjardins Group. It is even overtaking Toronto, where housing starts are half what they were last year.

This is the fourth straight month of gains, but the outlook for housing starts remains unclear, especially since there is “significant excess supply” of already built multi-unit apartments, said Norman.

“Without enough presales, developers may not be able to obtain funding to move projects forward,” he said.

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“If it’s hard to buy, it’s going to be hard to sell” — Investing pro Martin Pelletier has a cautionary tale about trying to sell his Maserati and the message is the same advice applies to low-volume stocks or private businesses operating in niche markets.

While these investments looks good on paper it can be difficult to sell without taking a significant discount, especially if a quick sale is needed or if market sentiment shifts.

Whether you’re buying a rare car, a microcap stock or a stake in a private company, these are the principles you should follow.

Read on

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s

YouTube channel

for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven 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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