Hidden Signs of Credit Stress the Data Misses

The broad picture of household finances in Canada suggests many households are coping with the recent mix of tariffs, a softer labour market, inflation and other pressures. However, a closer look reveals pockets of acute credit stress among certain groups of consumers.

Recent troubles at Goeasy Ltd. underscore those strains. The subprime lender reported substantial losses after writing down $178 million in loans, a decline that sent its shares tumbling and highlighted the vulnerability of riskier borrowers. That deterioration occurred even as TransUnion’s overall delinquency figures showed little change in the fourth quarter of 2025 compared with a year earlier, illustrating how averages can obscure widening differences across households.

Experts describe this as a divergence in financial outcomes. “Those high-level numbers can mask a little bit what’s actually happening,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “We talk about that K-shaped recovery — the average looks acceptable, but extremes are widening in both directions.”

More Canadians falling behind financially

Elevated unemployment among young people and the cumulative effect of rising living costs have pushed more households into distress, even where there has been no single catastrophic event such as job loss or illness. Bruce Sellery, CEO of Credit Canada, notes a striking paradox: many Canadians remain financially secure, while a growing number face serious difficulty.

Credit Canada’s non-profit counselling service recorded a 31% rise in requests last year. Increasingly the calls come from people who have not experienced an abrupt financial shock but who can no longer absorb the ongoing rise in everyday expenses. “Historically we saw clients with acute need,” Sellery said. “Now we’re seeing the cumulative impact of cost-of-living increases.”

That strain appears in several measures. Consumer insolvencies reached 140,457 in 2025 — the highest level since 2009 — averaging about 385 filings per day, according to the Canadian Association of Insolvency and Restructuring Professionals. Non-mortgage delinquencies have also climbed: instalment, auto and credit-card loan arrears are at their highest levels in more than a decade.

Bank of Canada data show 2.64% of instalment loans were at least 90 days past due in the fourth quarter of 2025, roughly double the rate from four years earlier. Credit-card delinquencies rose to 0.78% from 0.45% in 2021, while auto-loan arrears increased to 0.67% from 0.39% over the same period. These trends reflect greater reliance on consumer credit to meet everyday needs as prices and other costs rise.

Goeasy’s financial update provided a further example of worsening repayment behaviour among subprime borrowers. The company had projected that 8.75% of loans would not be repaid in 2025, a figure already elevated relative to prime lenders. Instead, its non-repayment rate climbed to 12.9% for the year, including a 24% surge in the fourth quarter, and management expects an 18% rate in the first quarter of this year. Those increases mirror TransUnion’s observation that more consumers are turning to personal loans to bridge higher living costs.

Credit tightens as defaults increase

As defaults rise, lenders are responding by pulling back on new credit. TransUnion reported fewer new issuances of credit cards, auto loans and especially instalment loans, with approvals increasingly favouring higher-quality borrowers. Equifax has observed a similar tightening. “It doesn’t necessarily reflect a drop in consumer demand,” Oakes said. “It could be that lenders are tightening their standards.”

Goeasy’s CEO, Patrick Ens, confirmed the firm is cutting back on originations and raising its lending standards. “We’ve reduced lender originations. We’ve significantly tightened credit standards,” he told investors, adding that the company will strengthen risk management, improve credit models and boost collections resources.

The stress is not limited to subprime borrowers. Across the country, households that face higher mortgage renewal rates are under greater strain, particularly in less affordable markets like Ontario and British Columbia, Randall Bartlett, deputy chief economist at Desjardins, said. Those regions are experiencing rising insolvencies as homeowners confront higher payments at renewal.

That dynamic contributes to a polarized picture of Canadian finances: reduced savings for some households, increased borrowing to cover essentials for others, and a widening gap between those who can absorb rate increases and those who cannot. Although Bank of Canada rate cuts have helped lower overall debt-to-income ratios, borrowers who rely on high-interest consumer products such as credit cards or other non-mortgage credit do not benefit as much from those moves. “People who aren’t homeowners, or who don’t have a mortgage, their missed payment rates are rising much faster than those that do,” Oakes said. “So that gap is widening.”

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