What the data isn’t showing about credit stress

The recent difficulties at Goeasy Ltd. give a hint of those troubles, after the subprime lender reported hundreds of millions in losses last month after it wrote down $178 million in loans and saw its shares plummet. The troubles happened despite credit rating agency TransUnion reporting overall delinquencies were unchanged in the last quarter of 2025 from a year earlier. 

It’s part of a broader trend of many people, especially homeowners, managing well, as financial strain worsens for those who were already struggling. “Those high-level numbers can mask a little bit what’s actually happening,” said Rebecca Oakes, vice-president of advanced analytics at Equifax Canada. “We talk about that K-shaped recovery, it’s kind of like that divergence. The average looks OK, but actually we’ve got more extremes going in different directions.”

More Canadians falling behind financially

Elevated unemployment, especially among youth, has created pressure, but many people are falling behind just from the accumulated costs of living, said Bruce Sellery, chief executive of Credit Canada. “The paradox is there are many people who are just fine, and the world is just fine, and many people who are in an exceedingly difficult situation.”

The non-profit credit counselling service saw requests climb 31% last year, including from many who haven’t necessarily had an abrupt financial challenge like job loss, health issue or divorce, but instead just can’t manage rising costs. “We, historically, skewed to people with acute need,” said Sellery. “What we’re seeing much more now is just the culmination of the cost of living increases.”

The strain can be seen in consumer insolvencies, which hit 140,457 in 2025—the highest since 2009—averaging about 385 per day, according to the Canadian Association of Insolvency and Restructuring Professionals.

It can also be seen in rising non-mortgage delinquencies, where credit cards, instalment, and auto loans are at the highest in more than a decade. Bank of Canada data shows that 2.64% of instalment loans were at least 90 days in arrears as of the fourth quarter of 2025, double where it was four years earlier. Credit card loans in arrears hit 0.78% the fourth quarter, up from 0.45% in 2021, while auto loans hit 0.67% up from 0.39% four years earlier.

It can also be seen in Goeasy’s updated financials. The firm had expected that about 8.75% of loans wouldn’t be repaid last year, a much higher level than banks, but reflective of riskier subprime borrowers. Instead, though, the number jumped to 12.9% for 2025, including a 24% surge in the fourth quarter, with expectations that it will also come in at 18% for the first quarter of this year.

The worsening payback rates come as more people rely on personal loans to manage through higher costs of living, according to TransUnion.

Credit tightens as defaults increase

But the increase in borrowers unable to repay loans is also leading lenders to pull back.

TransUnion noted a drop in new issuances of credit cards, auto loans, and especially instalment loans, with approvals skewing to higher-quality consumers. Equifax has also noted a pullback from lenders, Oakes said. “It doesn’t mean that there isn’t demand for that necessarily coming from consumers, it could just be that lenders perhaps are tightening.”

In promising a turnaround to investors, Goeasy chief executive Patrick Ens said the firm would be doing just that. “We’ve reduced lender originations. We’ve significantly tightened credit standards,” said Ens on their quarterly analyst call. “We will be strengthening our enterprise risk management with enhanced risk models, credit discipline, and collections resources.”

Even borrowers outside of the subprime space are feeling the pressure. The picture varies across the country, with rising insolvencies in places feeling the higher renewal rates of mortgages, said Randall Bartlett, deputy chief economist at Desjardins. “Where you’re really seeing the strain is in those more unaffordable markets, like Ontario and B.C., and households there really feeling the squeeze of higher interest rates on their household budgets.”

Those feeling the squeeze of higher rates at renewal is helping lead to the divergence of Canadian financial fortunes, he said. “There’s declining savings, increasing credit to cover essentials, and so it’s really becoming, a very sort of polarized story in terms of how things are doing in Canada.”

The Bank of Canada’s interest rate cuts have helped pull back overall debt-to-income ratios, but such rate moves don’t really help sub-prime borrowers relying on credit cards or other extra high-interest products. “People who aren’t a homeowner, or who don’t have a mortgage, their missed payment rates are rising much faster than those that do,” said Oakes. “So that gap is widening.”

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