It’s a striking trend: non-mortgage delinquencies in Canada have climbed to levels not seen since 2009, according to a report from Equifax, one of the country’s major credit bureaus. In practical terms, about 1.4 million Canadians recently missed a credit payment.
That headline sounds alarming, but the full picture is more nuanced. There are ways to respond, and opportunities—especially to help younger Canadians distinguish between productive, manageable debt and harmful debt.
Where’s the encouraging news?
At the end of the first quarter of 2025, total consumer debt in Canada stood at $2.55 trillion, up 4% year-over-year. While that’s a large sum—nearly double the federal government’s debt at the time—there was a modest improvement: consumer debt fell by more than $6 billion from the end of 2024.
Average non-mortgage debt rose to $21,859 per person in Q1 2025, but context matters: rising balances among certain age groups can reflect life-stage borrowing, investments in income-generating assets, or shifts in interest rates that prompt refinancing.
Age and debt patterns
Debt levels vary significantly by age. Younger people carry more consumer and student debt on average, and while mortgage balances typically decline as people get older, student and consumer debts can persist well into pre-retirement years. The table below, based on mid-2024 data, highlights how debt types change across age groups.
| Under 35 years | 35 to 44 years | 45 to 54 years | 55 to 64 years | 65 years and older | |
|---|---|---|---|---|---|
| Mortgage debt | $304,631 | $466,776 | $434,090 | $216,873 | $85,051 |
| Consumer debt | $47,173 | $67,041 | $84,720 | $79,060 | $42,025 |
| Student debt | $17,315 | $8,034 | $6,247 | $6,468 | N/A |
One of the drivers behind rising non-mortgage debt for younger Canadians is the strong auto loan market. Equifax’s Market Pulse report points to increased borrowing for vehicle purchases as buyers react to expected price increases and tariffs. Before taking on a car loan, run the numbers: account for the sticker price, monthly payments and total interest over the loan term.
To reduce the after-tax cost of a vehicle, discuss with a tax or financial advisor whether some costs can be deducted. When a vehicle is used for employment or self-employment, certain operating costs and a portion of fixed costs—such as interest or capital cost allowances—may be deductible with proper documentation. Consult a tax specialist for specifics.
Mortgage activity and renewal risk
New mortgage applications rose 57.7% year-over-year in Q1 2025, largely because many mortgages were coming up for renewal or refinancing at higher rates. First-time buyer activity also increased, up about 40% from a year earlier.
While monthly payments for some borrowers may be easing now due to lower rates, average loan sizes grew by 7.5% year-over-year, which raises questions about future renewal cycles. Research cited by Canadian Mortgage Trends suggests roughly 60% of borrowers renewing within the next two years could face higher payments. Factors that can drive higher rates include inflation, low savings, weaker trade, lower productivity, high government debt and default risks—many of which are present today.
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Where delinquencies are rising
Delinquency rates have climbed more among non-mortgage borrowers than among mortgage holders. Non-mortgage delinquency grew 8.9% year-over-year, while delinquency for mortgage holders rose 6.5%. Young people were the hardest hit: Canadians aged 18 to 25 saw delinquency rates increase by 15.1%.
On a positive note, average monthly credit card spending per cardholder fell by $107 in Q1 2025—the lowest level since March 2022—suggesting some pullback in discretionary spending.
Not all debt is bad. Here are practical rules for distinguishing good debt from bad debt:
- Borrow for appreciating or income-generating assets. Prefer debt that funds assets that gain value or help you earn income—like a rental property, a business investment or tools for self-employment. If a purchase will depreciate (for example, many vehicles), ensure it contributes to income generation if you plan to borrow for it.
- Prioritize eliminating non-deductible, high-interest debt. Credit card balances and other high-rate consumer loans are typically non-deductible and expensive—pay these down first unless you owe the Canada Revenue Agency, in which case tax debts should come first.
- Understand tax rules for investment borrowing. Interest on loans used to invest in registered accounts like an RRSP, TFSA or FHSA is generally not tax-deductible, so plan accordingly when borrowing to invest.
Practical tips to improve cash flow and reduce debt
Manage debt proactively with these steps:
- Pay down high-interest, non-deductible debt quickly. Focus on credit cards and expensive personal loans that erode your financial position.
- Consolidate thoughtfully. Use consolidation to simplify and reduce the number of small balances, while keeping tax-deductible and non-deductible debts clearly separated.
- Revise your budget. Cut discretionary spending, prioritize needs over wants, and consider income-boosting options such as a side gig, freelancing, or selling items you no longer need.
- Reassess large obligations. If a car loan is straining your budget, consider downsizing the vehicle. For mortgages, shop for competitive rates and consider increasing payment frequency to reduce interest over time.
- Stay current with tax filings. File returns on time and catch up on any late returns. A tax refund can be applied to debt, while unpaid taxes incur penalties and interest.
- Make RRSP contributions when appropriate. Contributions may produce tax savings and refunds you can use to reduce debt.
- Build an emergency fund and then invest. Prioritize an emergency buffer, then use tax-advantaged accounts like TFSAs, FHSAs and RRSPs to grow savings and benefit from tax rules like the Home Buyers’ Plan when relevant.
Debt can be a useful tool when managed responsibly, helping you access opportunities and build wealth. The key is to keep a clear repayment plan, avoid unnecessarily expensive borrowing, and use tax and financial advice when needed so you can move steadily toward your next financial goals.
Read more about debt:
- 1.4 million Canadians missed a credit payment in second quarter
- The MoneySense guide to debt management: How to get out of debt
- How to consolidate debt in Canada
- Canadians are turning to family—and credit—to stay afloat