Despite the overall drop in mortgage volume, consumer credit card debt rose during the same quarter. This increase in credit card debt can be attributed to Canadians using their credit cards to manage the financial implications of the COVID-19 pandemic.
The Equifax report examined mortgage trends from April to June of 2020 and looked at total credit outstanding, consumer indebtedness, mortgage originations and refinancing activity throughout this period. In the second quarter of 2020, the report found that total mortgage originations fell by 17.7% year-over-year, with new mortgage originations falling 25.3% and mortgage refinancing dropping by 8.3%.
However, while mortgage originations fell, the report found that credit card debt rose by 12.2%, and total consumer credit debt increased by 10.4%, year-over-year. The report suggests that this rise in consumer credit card debt is likely due to Canadians using their cards to make everyday purchases and to help manage the financial impact of the COVID-19 pandemic.
The report noted that delinquency rates also dropped in the second quarter of 2020, with mortgage delinquencies dropping 20.4%, and credit card delinquencies decreasing by 28.1%, year-over-year. This decrease in delinquency rates may be a result of the federal government's emergency support measures, which have helped keep Canadians afloat during the pandemic.
Additionally, there has been an increase in bankruptcies since the start of the pandemic, with insolvency stats increasing by 71% between March and August of 2020. This increase may be concerning to experts, as bankruptcies often signal an inability to repay debt.
The findings from the Equifax report show that mortgage volume decreased in the second quarter of 2020, though consumer credit card debt rose during the same quarter. The overall decrease in mortgage originations, coupled with the increase in credit card debt, suggests that Canadians resorted to using credit cards in order to manage their finances during the pandemic. Additionally, the drop in delinquency rates may be a result of the federal government's emergency support measures, while an increase in bankruptcies highlights the pandemic's effect on consumers' ability to pay back their debt. Further research into consumer behaviour is needed to gain insight into how Canadians are managing their finances during the pandemic.
This article was contributed on Jul 08, 2023
