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Pattie Lovett-Reid

Chief Financial Commentator, CTV


The housing market has been a pillar of strength as the Canadian economy tries to claw its way through the COVID-19 pandemic.

In the fourth quarter alone, increased mortgage activity and rising home prices raised the consumer debt level among Canadians to $2.07 trillion, a 1.5-per-cent climb from the previous quarter and up 4.1 per cent year-over-year, according to data released Thursday by Equifax Canada. 

However, those numbers don't tell the full story. Consumer debt, excluding mortgages, dropped again on average this quarter to $23,043, a three per cent year-over-year decline. However, quarter-over-quarter that same debt has declined by just 0.8 per cent.

Canadians have been paying down their credit card balances as lockdowns and other pandemic restrictions have resulted in reduced spending. 

“This reduction has been a positive consumer shift but that’s not to say we are out of the woods in terms of recovery,” said Rebecca Oakes, assistant vice president of advanced analytics at Equifax Canada, in a release accompanying the data. “Deferral programs are ending and pockets of financial stress are starting to emerge for some consumers. Credit card spending is also starting to rise again.”

In an ironic twist, the pandemic has provided more than 3 million Canadians with a little financial wiggle room through credit deferral programs resulting in fewer Canadians falling behind on their debts. However, as relief programs draw to a close, early stage delinquencies - a result of one or two months of missed payments – continued its march higher in the fourth quarter. The 30-day (or more) delinquency rate rose 31 per cent on mortgages, the same metric spiked 76 per cent on instalment loans quarter-over-quarter. 

The numbers suggest the pandemic didn't reduce delinquencies so much as it deferred them.

Fear is also mounting, as high demand and low inventory ratios in the housing market, coupled with rock-bottom rates, could prove to be a recipe for disaster for first-time homebuyers. Especially those who have taken on more mortgage debt than they can handle to get a foot in the door.

With Canadians sitting on over $200 billion in excess savings, there is a pent-up demand to get out there and spend. However, without a vaccine taking hold and getting widely distributed, we are still in uncharted waters. At the same time it might be hard for the Bank of Canada to live up to its commitment to keep rates lower for long if inflation starts to creep higher. 

It is going to be a choppy recovery at best and it could force consumers into a delicate balancing act to navigate it. So, proceed with caution.