Falling interest rates are coming home to roost in the form of rising Canadian debt loads.
According to credit-tracking agency TransUnion Canada, total consumer debt spiked 4.1 per cent to $2.6 trillion in the third quarter of 2025, including a 4.1 per cent jump in mortgage balances, year-over-year, to $1.89 trillion as consumers take advantage of lower interest rates to take on more debt.
And while mortgage delinquencies remained low nationally, regional economic pressures from U.S. tariffs are hitting some Canadians harder than others — and it could get worse.
According to Matt Fabian, director of financial services and research at TransUnion, it can take several months before delinquencies spike after an event like layoffs in the Ontario auto sector.
“We’re nearing where we should start to see some early signals,” says Fabian of industries in regions affected by U.S. tariffs that are already experiencing a rise in unemployment.
According to Statistics Canada, the unemployment rate in Windsor-Sarnia, where the auto industry is heavily integrated with the U.S., reached 10 per cent in the third quarter of 2025, a 1.7 per cent rise from a year ago.
“What happens is there’s a shutdown, people get laid off, there’s maybe some payout, then they go into unemployment insurance for a while until that runs off,” says Fabian, “so there’s usually a several month lag between those events happening and when you start to see delinquency spikes.”
Mortgage delinquencies remained low across the country, even as loan sizes increased across most major Canadian cities.
The Canada Mortgage and Housing Corporation last week reported mortgage delinquencies in Ontario rose in the second quarter of 2025 to 0.23 per cent, slightly higher than the national average of 0.22 per cent. The rate of delinquency in Toronto was up 60 per cent to 0.24 per cent, according to the CMHC.
“What tends to kick off delinquencies is a loss of employment,” says Aled ab Iorwerth, CMHC’s deputy chief economist. “If the international situation doesn’t get resolved, you can expect to see that happening — particularly in southern Ontario.”
Delinquency spikes in Toronto are something that ab Iorwerth attributes to a weak economy in the city combined with over-leveraged borrowers who got into the housing market in 2020-2021 when prices soared.
Outside of Ontario, other areas that Fabian flagged for future volatility include Quebec and some pockets of the Prairies — all areas with industries hurt by steel and aluminum tariffs.
Other consumer debt hits $673 billion
The TransUnion report showed nonmortgage debt grew 4.3 per cent this quarter to $673 billion, year-over-year.
Average credit card balances spiked 1.9 per cent to $4,652, with riskier subprime consumers seeing an even higher spike in their monthly bills — a sign, according to Fabian, that an inflationary driven rise in living costs continues to squeeze financially strained households.
Late-stage credit card delinquencies (more than 90 days past due) edged up marginally to 0.91 per cent, a rate slightly higher than pre-pandemic levels.
Early-stage delinquency rates (30 days past due) for all types of loans actually declined six basis points this quarter to 4.38 per cent, while late-stage delinquencies (more than 90 days past due) increased four basis points year-over-year to 1.77 per cent.
“We’re seeing a bifurcation in terms of delinquency rates,” says Fabian. “Some of the consumers that are missing payments are starting to miss multiple payments, going deeper and later into delinquency, so those that are struggling are really struggling and having a hard time coming back.”
Missed credit card payments among millennials and baby boomers declined from this time last year, while the rate among Gen Z rose eight basis points to 1.29 per cent. Youth aged 15-29 in Canada are also experiencing one of the worst unemployment rates in the last 15 years at 14.1 per cent, according to Statistics Canada.
Mark Kalinowski at Credit Counselling Society, a non-profit that helps Canadians in debt, says the organization helps people of all generations, but understands the particular strain on youths.
“Younger generations are borrowing for their education,” says Kalinowski. “When the money isn’t there once they graduate, they use credit cards to subsidize their education and lifestyle in the meantime.”
In response to an increasing level of stress from clients, Kalinowski says his organization recently deployed standby counsellors for those who can’t wait for an appointment.
He advises that people reach out at the first sign of stress, when credit balances are growing and you can’t get out of overdraft.
“Talk to a bank, see what they can do in advance,” he says. “If you don’t think it’s working, reach out to a non-profit.”
