This text is part of the special Personal Finance section
High interest rates and inflation fuel household debt. The situation could get worse as mortgage renewals increase. But not all Quebecers are affected in the same way.
According to Equifax Canada, Canadians had accumulated $2.4 trillion in debt as of September 2023, up $80.9 billion from the same period the previous year. Rebecca Oakes, vice-president of advanced analyzes at Equifax Canada, recalls that it is normal for the overall debt to increase, since the Canadian population is growing. Nor is it surprising to see overall mortgage debt follow the increase in prices on the real estate market.
“What is more unusual and more worrying is that debt unrelated to a mortgage loan is increasing quite significantly, particularly credit card debt,” explains the vice-president. The average credit cardholder balance was $4,119 in the third quarter of 2023, compared to $3,727 the year before.
Taking into account all credit products, the percentage of Canadians who missed a payment increased from 1 in 31 during the pandemic to 1 in 25 during the third quarter of 2023. “18 months ago, it “It was mostly low-income people and young people who were missing payments, but now we’re seeing more people aged 36 to 65 and homeowners finding themselves in this situation,” says Rebecca Oakes.
The increase in mortgage debt plays a big role in these difficulties. However, this phenomenon affects Quebec less than other provinces. The average amount of mortgage debt there is approximately $170,000, compared to an average of $259,000 for the rest of Canada. In Ontario, this amount reaches $315,000. At $18,500, the average non-mortgage debt in Quebec also remains lower than that of other Canadian provinces, which reaches $21,000.
The different faces of debt
That said, numbers don’t tell the whole story and debt can have a very different impact from one person to another. Maude Pugliese, associate professor at the Urbanization Culture Society Center of the National Institute of Scientific Research, revealed several of these disparities in a recent study on the overindebtedness of Quebec households.
The researcher’s team surveyed more than 4,800 respondents in 2022 and 2023, with the collaboration of Léger Marketing. This survey indicates that nearly seven out of ten Quebecers are carrying debt. More than a quarter of these people experience at least occasional problems paying them. For almost one in ten people, these difficulties are acute and 2% of indebted respondents simply cannot cope.
“We wanted to go further and understand why people get into debt and why some of them can no longer repay what they owe,” says Maude Pugliese. In general, two main theories explain debt: overconsumption and compensation (having to go into debt because our income cannot cover current expenses).
The researcher identified five typical profiles of debt mechanisms, three of which generate more problems. The first two relate to debts incurred to buy a house or a car, or to study. The others concern support for children or loved ones, loss of job or illness and an amalgam of several economic problems. Among people in debt, more than a quarter fell into one of these three categories.
“These people have compensatory debt, that is to say they borrow to cope with daily life, and it is among these three groups that there are the most respondents who experience repayment difficulties”, underlines the professor.
It indicates, for example, that 70% of people whose debts result from job loss or illness struggle to repay them, compared to only 10% of those who contracted debt for the purchase of a house or car.
The study also shows that young people under 35, racialized people and parents of children, especially if they are alone or members of a blended family, are the groups most affected by over-indebtedness.
“The results suggest that we must continue to think about how to protect Quebecers, in particular certain demographic groups, from certain risks that can cause them to sink into unsustainable debt,” says Maude Pugliese.
This content was produced by the Special Publications team at Duty, relating to marketing. The writing of the Duty did not take part.
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2024-02-10 06:36:45
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