The number of Canadians who are financially insolvent and on the verge of bankruptcy is at its highest level since the aftermath of the global financial crisis in 2009.
A new report from Equifax Canada says insolvencies in the country are on the rise due to growing financial strains on homeowners.
The number of insolvencies in this year’s first quarter rose 18.8% year-over-year, indicating that many consumers “may have reached a financial inflection point,” according to Equifax.
Homeowner insolvencies increased 11% from the fourth quarter of last year.
Insolvency is a financial state where a person cannot pay their debts, or where liabilities exceed assets. Bankruptcy is a legal process used to resolve insolvency.
The new report says that the financial strain on Canadians has worsened, with the average non-mortgage debt reaching $43,300 in the first quarter, up from $40,200 two years ago.
Among homeowners, average non-mortgage debt reached $82,400, up 19% compared with two years ago.
For homeowners who have missed a mortgage payment, their average delinquent non-mortgage balances reached $54,000 in the quarter, a 4.6% increase compared with a year ago.
The report said that Canada’s high-priced housing market is causing severe financial strain, with mortgage delinquencies jumping 52% in Ontario and 36% in British Columbia year-over-year.
During the quarter, total consumer debt in Canada climbed to $2.66 trillion, up 3.8% year-over-year, while non-mortgage debt fell by more than $487 million.
The quarter saw a decline in demand across most credit categories as new credit card originations hit a four-year low, said Equifax Canada.
Canadians have struggled in recent years with persistently high inflation, rising energy costs, and the impacts of U.S. tariffs.
Insolvencies and bankruptcies in Canada have been steadily rising since the Covid-19 pandemic struck in 2020.
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