Peak Buyers Are Defaulting. Renters Are Going Insolvent.

Canadian household debt hit a record $2.64 trillion in the second quarter, up 4.6% from a year earlier, TransUnion Canada said. The growth is coming from existing balances, not a rush of new loans. Mortgages rose 3.9% to $1.93 trillion even as the number of accounts fell 0.2%. Loans at least 60 days past due climbed to 0.31% of balances, up 6 basis points, faster than the account-level rate. The stress is sitting on the bigger loans.

Buyers who borrowed in the 2022-23 rate-hike peak are slipping first. The 12-month delinquency rate on 2023 subprime originations hit 2.27%, more than double the 0.94% for similar 2021 loans. New originations are smaller, down 2.4% to $354,683. 99.7% of mortgage holders are still paying on time. Ontario's balance-level arrears jumped 10 basis points to 0.41%, the worst move in the country.

The insolvency rate hit 1.10%, up from 0.94% two years ago and the highest in that span. TransUnion says the surge is coming from non-mortgage holders. Average non-mortgage debt is $28,118, up 7.6%. Subprime card limits were cut 22.5% to $1,396. "Those without the asset buffer of homeownership face growing financial pressure," said Matt Fabian, TransUnion Canada's senior director of financial services research.

Peak investors paid any price and tried to pass it to tenants. Renters had no equity to draw. Cost of living is showing up as more credit, then arrears, then insolvency. The bill is landing on both sides of the lock.