Why More Canadians Are Defaulting on Non-Mortgage Debt

Understanding the Rising Financial Pressure 

Canadians are facing unprecedented levels of financial pressure. While mortgage payments often dominate the national conversation, a new and equally concerning trend is emerging: a sharp rise in defaults on non-mortgage debt, such as credit cards, auto loans, and lines of credit. 

According to recent data from Equifax and Oxford Economics, Canadians across the country — particularly in Ontario — are increasingly falling behind on their financial obligations. In Q1 2025 alone, there was a 17.06% increase in late or defaulted payments compared to the same period last year. 

This financial strain isn’t just about overspending; it reflects a larger affordability crisis, especially in metro areas like Toronto and Vancouver, where the cost of living has surged well beyond income growth. 

The Hardest-Hit Regions 

Ontario leads the nation in non-mortgage delinquencies, with a 24% year-over-year increase. This spike reflects rising economic distress across the Greater Toronto Area (GTA), where residents are now dedicating more of their income to housing than almost any other major city globally. 

Other provinces also experiencing significant increases in delinquency rates include: 

• Alberta:15.93% increase 

• Quebec:13.95% increase 

• British Columbia:12.63% increase 

In contrast, areas like Newfoundland (+0.48%) and Manitoba (+2.04%) remain relatively stable. 

Cities with the Highest Default Rates 

Municipal data shows Toronto with a 24.28% year-over-year rise in delinquencies. When it comes to non-mortgage consumer debt, Fort McMurray leads with a delinquency rate of 2.56%, followed by Edmonton at 2.26% and Toronto at 2.17%. 

Average non-mortgage debt per person: 

• Fort McMurray:$37,269 

• Toronto:$21,048 

• Ontario (provincial average):$22,543 

This growing debt burden is making it increasingly difficult for many households to stay afloat. 

What’s Causing the Increase? 

Several key factors are contributing to the surge in non-mortgage debt defaults: 

1. Cost of Living Outpacing Income:Essentials like food, housing, insurance, and utilities have risen sharply. 

1. Interest Rate Pressures:Higher borrowing costs make it more difficult for individuals to manage existing debt. 

1. Reduced Savings Buffers:Many Canadians depleted emergency savings during the pandemic and are now left with little room for unexpected expenses. 

1. Credit Dependency:A growing reliance on credit cards and installment plans has created a fragile financial structure that easily collapses under pressure. 

The Broader Impact 

Rising defaults aren’t just a personal issue — they have broader economic implications: 

• Reduced consumer spending 

• Strained lending institutions 

• Lower credit scores, making future borrowing more expensive 

• Potential increases in bankruptcy filings 

What Can Be Done? 

For homeowners, leveraging home equity may offer a viable path forward. Options like mortgage refinancing, second mortgages, or home equity lines of credit (HELOCs) can help consolidate high-interest debt into a single, manageable payment. 

However, these solutions must be approached strategically. Consulting a licensed mortgage broker or financial advisor is essential to avoid turning short-term relief into long-term regret. 

Steps to Take Now: 

• Calculate your debt-to-income ratio 

• Review and cut unnecessary expenses 

• Seek advice on debt consolidation options 

• Avoid predatory lenders or unlicensed advice 

• Build an emergency savings plan for future stability 

Final Thoughts 

Non-mortgage debt defaults are rising for a reason and ignoring the issue won’t make it go away. Whether you’re already behind or just starting to feel the pressure, now is the time to take action. 

The sooner a financial strategy is put in place, the better the chance of regaining control and avoiding more severe consequences down the road. Book a free consultation with our team today.