Why Canadian Consumer Debt Keeps Rising and What It Means

Canadian consumer debt climbed to a record $2.5 trillion in the third quarter, as many households continue to grapple with the cost of living and a weakening job market, according to new reports from two major credit bureaus.

Equifax’s quarterly analysis, released Tuesday, shows the largest increase in missed payments among newcomers and people who first accessed credit within the past 12 to 36 months, compared with the same group a year earlier.

“Recent newcomers to Canada are encountering difficulties navigating the Canadian financial system,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “While newcomers have historically shown strong credit performance in their first years here, rising unemployment and persistently high inflation over recent years have likely intensified financial pressure on this group.”

The bureau reported that more than 1.3 million consumers missed a credit payment in the third quarter, a 10.6% increase from the previous year, indicating a widening strain on household budgets.

Are Bank of Canada rate cuts helping?

Despite the higher delinquency rate, Equifax noted that the pace of missed payments has started to moderate following recent Bank of Canada interest rate reductions. Lower borrowing costs can ease monthly obligations for some households, though the improvement will vary across demographic groups.

TransUnion reported on Tuesday that total consumer credit debt rose 4.1% year-over-year in the third quarter. The bureau highlighted that Gen Z has been the fastest-growing group carrying outstanding balances, as more younger consumers enter the credit market.

Millennial and Gen Z households now account for about 45% of total household debt in Canada, holding roughly $1.1 trillion in outstanding balances. These younger cohorts are increasingly important to overall credit dynamics, and their behavior will influence future borrowing and repayment trends.

TransUnion also noted that minimum payments have been rising, particularly for mortgages, where required monthly payments are up about 11% compared with a year earlier. Higher minimums squeeze household cash flow and can make it harder for borrowers to keep up, especially if income growth is stagnant.

What type of debt are Canadians carrying?

Equifax identified auto loans as a leading contributor to the rise in consumer debt. Non-bank auto lending grew by double digits, while bank-issued auto loans also rose year-over-year in the third quarter. Shifts in the auto market—such as easing financing costs and some moderation in vehicle prices—appear to be encouraging more purchases, according to Equifax.

TransUnion expects auto loan balances to remain broadly stable in 2025, suggesting that lower interest rates may offset elevated vehicle prices. The bureau also anticipates a modest improvement in auto delinquencies next year as economic conditions continue to evolve.

Credit card balances are expected to grow as well. TransUnion projects average credit card balances for prime and above consumers to increase moderately, while consumers in below-prime risk tiers carry substantially higher average balances, reflecting greater vulnerability to payment shocks.

“Although some pockets of stress persist, improvements in macroeconomic factors such as inflation and interest rates are expected to ease pressure on household finances,” said Matthew Fabian, director of financial services research and consulting at TransUnion Canada. For many households, the path to recovery will depend on income growth, employment stability and access to manageable credit options.

Read more on dealing with debt:

• How much credit card debt does the average Canadian have?
• What happens if I don’t pay my credit card bills?
• Why young people keep getting caught in debt traps and how to break the cycle
• The best balance transfer credit cards