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Read MoreDBRS: Rising Unemployment Driving Consumer Loan Stress Across Canada
Canadian households are facing growing financial pressure, with delinquencies climbing across consumer loan categories as unemployment rises, according to a new report from Morningstar DBRS Inc.
The credit rating agency noted that economic growth has been weakened by ongoing trade tensions, leading to a national jobless rate of 7.1% in August, with particularly high levels in Alberta and Ontario.
“As a result, delinquency rates have risen across all personal lending products,” DBRS stated. “Credit cards, auto loans, and lines of credit are now well above their pre-pandemic averages.”
Loans backed by real estate collateral, including mortgages and home equity lines of credit (HELOCs), have remained relatively stable, with delinquency rates still below pre-pandemic levels.
Borrowers who own homes also tend to have stronger repayment records on non-mortgage products.
“On average, consumers without mortgages had a 2.38% delinquency rate on non-mortgage loans in Q2, compared to just 0.53% among mortgage holders,” the report said.
This widening gap reflects a structural divide: those able to qualify for mortgages generally possess stronger financial profiles, allowing them to better manage higher borrowing costs and inflation. Conversely, renters—who often earn less—are being hit harder by surging living expenses, particularly rising rents.
Looking forward, even mortgage holders will begin to feel the strain. DBRS estimates that 60% of all mortgages will reset this year and next, exposing households to sharply higher monthly payments.
“Most borrowers will be able to manage the increase, thanks to the federal stress test,” the report said. “However, lower-income families and heavily leveraged households in expensive provinces like Ontario and British Columbia could struggle.”
The labour market remains the key variable for the outlook of both household credit quality and lender profitability.
“Further job losses would likely trigger deeper deterioration in delinquencies and impairments,” DBRS warned. “Lenders with greater exposure to high-risk borrowers face the greatest downside risk.”
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