Canadian households are increasingly turning to credit amid declining interest rates, pushing total consumer debt to a staggering $2.6 trillion according to new data from TransUnion. The credit reporting agency's Q3 2025 Credit Industry Insights Report reveals a complex financial landscape where mortgage activity surges while economic disparities deepen across different regions.
Mortgage Market Transformation
The third quarter of 2025 saw total Canadian consumer debt grow by 4.1% year-over-year, reaching that massive $2.6 trillion figure. Mortgage balances specifically increased by 4.1% to $1.89 trillion, while non-mortgage debt climbed 4.3% to $673 billion. This growth reflects both rising average loan sizes and an expanding borrower base, with the number of credit-active consumers growing by 2.7% year-over-year.
Perhaps most notably, mortgage originations jumped by 18% compared to the same period last year, driven by homeowners seeking to capitalize on lower interest rates through refinancing and earlier renewals. Canadians are increasingly opting for shorter one- or three-year fixed mortgage terms, departing from the traditional five-year term that historically dominated the market.
This strategic shift toward shorter terms allows borrowers to navigate current high-rate conditions while positioning themselves to secure more favorable rates upon renewal in the near future. The resulting increase in mortgage turnover has created a spike in origination volumes that analysts believe may persist until interest rates stabilize.
Affordability Challenges and Regional Variations
Despite some easing in housing prices, affordability remains a significant challenge nationwide. The average new mortgage loan amount increased by 4.1% year-over-year to $359,623, with Toronto and Vancouver continuing to drive the national average as Canada's least affordable markets.
Regional analysis reveals striking variations in mortgage growth. Quebec City experienced the most dramatic increase in average new mortgage loan size at 14.01% year-over-year, followed by Montreal at 9.66% and Saskatoon at 8.51%. Other cities like Calgary and Edmonton saw increases of 7.60% and 6.53% respectively, while Halifax actually recorded a slight decrease of 0.17%.
Diverging Delinquency Trends Highlight Economic Disparities
While overall mortgage delinquency rates remain near historic lows at 0.26%, the report reveals a troubling divergence in consumer financial health. Early-stage delinquencies have declined, but late-stage delinquencies are rising, particularly in Ontario, Alberta, and Quebec.
This pattern suggests a widening financial disparity among Canadian consumers. The national serious consumer delinquency rate increased by 2 basis points year-over-year but remains relatively low at 0.26%, partly due to protective measures like the federal mortgage stress test that have helped reduce defaults and foreclosures.
The credit card market shows signs of cooling as originations declined further, indicating consumers may be becoming more cautious with unsecured borrowing despite the overall growth in credit balances.
TransUnion's comprehensive data paints a picture of a Canadian economy at a crossroads, with consumers strategically navigating interest rate changes while underlying economic disparities become increasingly apparent across different regions and consumer segments.
