Cautious Holiday Spending Appears to Have Softened the Typical January Credit Card Delinquency Spike

Core Insights - Financial stress in Canada increased in Q4 2025, but at a slower rate compared to previous years, with older consumers showing resilience while younger consumers and those in Ontario and Western provinces exhibited financial weakening [1] Consumer Debt Trends - Total consumer debt reached $2.65 trillion in Q4 2025, marking a 3.13% year-over-year increase, driven by a $50.26 billion rise in mortgage balances and a 4.50% increase in non-mortgage debt [2] - Delinquency rates for non-mortgage debt rose, with 90+ day delinquency increasing from 1.64% to 1.73%, a year-over-year increase of 5.43% [2] Age Group Analysis - Consumers aged 26 to 35 experienced the highest credit stress, with a delinquency rate of 2.55% and an 8.39% year-over-year decline in credit health [3] Regional Divergence - A "two Canadas" scenario emerged, with Ontario experiencing the fastest growth in non-mortgage delinquency at 10.31% compared to Q4 2024, while regions with better housing affordability like Prince Edward Island and Nova Scotia saw decreases in delinquency rates [4] Credit Card Spending - Credit card spending during the 2025 holiday season decreased by 0.7% year-over-year to $2,297, with younger consumers (aged 26-35) reducing their holiday spending by 2.0% [5] - Despite reduced spending, credit card balances reached a historic $131 billion, an increase of 4.04% [5] Borrowing Power and Credit Access - Lenders tightened access to credit for riskier borrowers, with non-mortgage debt for subprime consumers remaining stagnant, while super prime consumers saw a 6.1% increase in average non-mortgage debt to $20,818 [6] Mortgage Market Dynamics - Total mortgage debt reached $1.95 trillion in Q4 2025, a 2.6% year-over-year increase, with mortgage renewals dominating the market [7] - Average new loan amounts increased by 4.1% to $363,778, with first-time homebuyers facing an average new loan size of $441,301, up 5% [8] Interest Rate Impact - The Bank of Canada's 2.25% policy rate provided some relief, but housing affordability remained strained, particularly in high-priced regions like Ontario and British Columbia [8] - Rising missed payments on higher-value mortgages in Ontario indicated that post-renewal payment levels were too high for some consumers [9]