Equifax Canada's President highlights Canadians' financial struggle due to higher borrowing costs & inflation, leading to increased debt stress. (Investing.com)
The head of a major credit reporting agency has highlighted the increasing financial strain Canadians are facing due to rising borrowing costs and inflation.
Sue Hutchison, president of Equifax Canada, shared in an interview with BNN Bloomberg that Canadians are grappling with greater challenges in managing their debts. She emphasized a noticeable surge in concerns among citizens regarding the costs of essential needs like food and housing, particularly noting a rise in mortgage payment delays.
"Overall, we're witnessing a significant uptick in consumer proposals and a beginning increase in bankruptcies," Hutchison remarked on Tuesday. She specifically highlighted the mounting issues in Ontario and British Columbia, where instances of missed payments and debt defaults have notably escalated.
Hutchison pointed out that a considerable portion of the consumer debt is attributed to mortgages, which have collectively amassed a total debt of $2 trillion, marking an annual increase of approximately $80 billion.
"We anticipate substantial financial strain, referred to as payment shock, among our lenders over the upcoming year," she added.
Regarding credit card usage, Hutchison mentioned a growing dependence on credit cards to cover living expenses. She observed a spike in overall balances, noting that credit cards now constitute 78 percent of non-mortgage debt compared to 40 percent in the previous year's third quarter.
"In our analysis of this debt portfolio, we're increasingly concerned about more individuals missing payments and opting to pay only the minimum amount instead of clearing the entire balance," she highlighted.
Looking ahead, Hutchison suggested that lower interest rates might alleviate some pressure on consumers, particularly those facing mortgage renewals. Nevertheless, she expressed concerns that the cumulative impacts of inflation would continue to strain the financial situation for Canadians.
Statistics Canada's recent report on the consumer price index revealed a 3.1 percent year-on-year increase in November, maintaining the same pace as the previous month, indicating the persistent challenge of inflation.
