FINA Committee Meeting

     I call this meeting to order.

    Welcome to meeting number 31 of the House of Commons Standing Committee on Finance.

    Today's meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and remotely using the Zoom application.

    This morning, pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, March 9, 2026, the committee commences its study of household debt in Canada.

    I would like to welcome our officials.

    From the Department of Finance, we have Brian Torgunrud, senior director, economic analysis and forecasting; Matthew Boldt, the acting senior director for housing finance; and Mark Radley, the director of consumer affairs.

    Thank you for joining us this morning, gentlemen. You will have five minutes for your opening statement.

    Thank you.

     Thank you, Madam Chair and honourable members.

    Thank you for giving us the opportunity to appear before you. We're pleased to be here today to discuss with you the issue of consumer debt.

    Household debt in Canada remains elevated. We recognize that many Canadians are experiencing financial pressure, particularly following a period of high inflation and higher interest rates. At the same time, it's important to take a balanced view. While indicators of household financial stress have increased, most households continue to meet their financial obligations, and key metrics such as credit arrears and insolvencies, although up from pandemic-era lows, remain broadly in line with historical averages.

    In addition, most mortgage holders have adjusted to higher interest rates since 2022, often by reducing spending, relying on savings or refinancing their mortgages, and they have continued to make their payments. Overall, this suggests that, despite increased pressures, the household sector has remained resilient, and macroeconomic and financial system risks stemming from household vulnerabilities remain low.

    However, this is an important issue to Canadians with meaningful implications for the economy, and it is something we will continue to monitor closely. There are three officials from two branches of the Department of Finance here today, and we are prepared to speak to the department's role as it relates to this issue from our perspectives.

    From my perspective of economic analysis and forecasting, as the federal government's lead on economic and fiscal policy, the Department of Finance is responsible for monitoring Canadian and global economic developments. We track a broad range of indicators from various sources. For example, we track GDP growth, labour markets, inflation, financial conditions and household balance sheet indicators such as indebtedness and net worth.

    The department assesses the implications of these developments for the economic outlook and for fiscal planning. Additionally, as part of the department's responsibility for financial sector policy, we monitor mortgage indebtedness and signs of mortgage hardship as part of our broader surveillance on financial system vulnerabilities and risks.

    Responsibility for monitoring and managing these risks is shared across the federal system. We work closely with Canada's federal financial sector agencies—OSFI, CMHC, FCAC and the Bank of Canada—on these issues.

    The department also oversees the policy framework for federally backed mortgage insurance, including parameters such as minimum down payments, maximum amortization periods and insured property value limits. We also supported the previous government in developing the Canada mortgage charter, which it announced in 2023 and enhanced in 2024.

    Similarly, the department is also responsible for the financial consumer protection framework, the consumer protection framework for banks. This framework includes protections such as requirements for clear disclosures, cancellation rights for certain products, alerts when a customer is reaching a credit limit, express consent prior to providing a customer with a credit product or increasing their credit limit, and the fair treatment of customers.

    OSFI, as the provincial regulator of federally regulated lenders, provides supervisory intelligence on mortgage portfolio risks. It publishes an annual risk outlook, which provides an overview of the current risk environment, the top risks currently faced by the Canadian financial system and the actions OSFI is taking in response.

    The Bank of Canada assesses broader financial system vulnerabilities and publishes an annual financial stability report that assesses the resilience of the Canadian financial system and focuses on key risks that could undermine its stability.

    FCAC protects consumers by supervising banks' compliance with market conduct obligations and monitoring consumer-reported financial stress. It has issued the guideline on existing consumer mortgage loans in exceptional circumstances and tracks trends in borrowers' financial well-being through its monthly financial well-being monitor.

    The department's perspective on consumer debt is necessarily macro, reflecting its responsibility for economy-wide analysis across a broad range of fiscal and economic issues. Within this context, perspectives from other stakeholders and specialized agencies can complement this view by shedding light on recent developments in consumer debt at the borrower level.

    Thank you very much. My colleagues and I would be pleased to answer any questions you may have or point you to the appropriate stakeholder who can.

    Wonderful. Thank you so much.

    We will begin this round of questioning with Mr. Kelly, for six minutes please.

     Thank you.

    In your remarks, you mentioned consumers who have to adjust—I guess that is the euphemism we might go to—to the higher interest rate environment with maturing mortgages. You said that consumers have responded to this without significant defaults because they are reducing spending on other things, refinancing their mortgages and exhausting their savings.

    While it's important that people are able to pay their mortgages and we certainly need to see Canadians able to repay their debts, if Canadians are responding to a higher payment environment only by reducing spending, refinancing and exhausting their savings, they're not getting ahead. What does this say to the quality of life of Canadians, if those are the reasons we haven't seen massive defaults in the face of higher costs?

    The key thing I would say here is that among these three reactions that consumers may have taken in the face of refinancing at higher rates, or dealing with higher mortgage rates, is not that they have exhausted savings but that they had significant savings already.

    What we saw, particularly during the pandemic and the period prior to the run-up in interest rates, was a large-scale increase in other types of financial assets. I think, on an aggregate basis, if you look at the financial assets that households hold, it represents something like four and a half times the value of outstanding debt. Therefore, the sector as a whole had a fair amount of flexibility and a fair cushion built in to make those adjustments.

    Again, what we're seeing is a reduction in savings. What isn't happening and what I didn't hear in the explanation—which I think would match with what all MPs are hearing from their constituents—is an increase in consumers' ability to repay. Per capita GDP has been flat for a decade. The only thing that would allow Canadians to take on more debt or absorb higher debt service costs that won't result in a loss of quality of life—an inability to spend money on other things or to save and to get ahead for retirement, or for other purposes, or to simply keep spinning their debt—would be a rise in their actual income and ability to pay debt. Canadians can only exhaust savings, refinance or cut spending for so long. Any household, if those are the three things that are keeping it going, is going to run out of room at some point.

    Therefore, what does the consumer indebtedness say about the need for a more productive economy that can support the debt loads we've seen?

     It's an excellent question. I think it's one that the department and the government fully agree with—the concept that we need a productive economy, that we need real gains in income. Nonetheless, to be clear, we have had real gains in income. We have had wages that have outpaced inflation. I think households—

     Over the last 10 years, has per capita GDP in Canada gone up or down?

     It has been fairly flat.

    Yes, it's been completely flat. We're not seeing the increase in Canadians' incomes that would support higher debt. It's been flat for a decade.

     I had other questions that were not related to this, but let's stay on this.

    People are now spending savings and assets that inflated during the COVID period. Is this real estate equity? Is this other savings? Do you have information about that?

     It's financial assets. A lot of it was held in currency and deposits.

    Thank you very much, Mr. Kelly.

    We will continue now with Mr. Sawatzky for six minutes.

     Thank you, Chair, and thank you to the witnesses for coming today.

    Given your monitoring of the overall financial position of Canadian households, what areas of vulnerability are you most focused on when you assess risk for financial stability?

     I can start, and Matt can jump in.

     I think we follow research that has been published by the Bank of Canada in its financial stability review. That publication explicitly tries to identify vulnerabilities in the financial system and in the macroeconomy from this. We've seen there that the biggest strains are concentrated in a relatively small share of the household sector: vulnerable groups, renters, younger households, lower-income households and some newcomers. It's not the case that all households are necessarily stressed or vulnerable in that way.

    They also noted that about 8% of households are living paycheque to paycheque, and these folks are particularly exposed to shocks. Data from the survey they presented said that about 10% are facing financial stress that may not be sustainable.

    Can you speak to how worldwide economic disruptions have affected this, such as COVID, international wars and things like that?

    Clearly, there are a lot of different channels through which these events have had an impact.

    As I mentioned previously, COVID itself had a counterintuitive result. Because of high levels of government support, the household sector ended up accumulating savings and ended up in a fairly strong financial position at the end of it, but clearly, when you go into a situation of economic uncertainty, such as what we've faced over the last year and a half, it is reflected in less confidence and willingness to make major purchases and less willingness to borrow. It also means less willingness to spend, so you have these knock-on effects of generalized weakness in the economy, which itself will have implications for incomes and for the financial health of the household sector itself.

    Would tariffs from the United States affect that as well?

     Yes, very much so.

    Your department sets eligibility rules for federally backed mortgage insurance. What factors do you consider when determining minimum down payments, maximum amortization periods or property value limits?

    My name is Matthew Boldt. I work on the housing finance team. We provide advice to the Minister of Finance with respect to those responsibilities.

    Overall, you're trying to strike a balance between making mortgage insurance available to support home ownership and taxpayer risks to the housing sector when the federal government supports more risk through mortgage insurance. That's the key balance there.

     Thank you.

    How does the department balance its objectives of maintaining financial stability, supporting affordable access to credit and ensuring consumers are protected in a changing economic environment?

     I can go a bit further on that and say that the department works with a number of the agencies that Brian mentioned in his opening remarks. We work closely with the Bank of Canada, with the Office of the Superintendent of Financial Institutions and with the Financial Consumer Agency of Canada to discuss how we are doing and to share analysis in terms of how we're balancing those objectives.

    To give one example, in terms of financial stability and the prudential regulation of the banking sector, OSFI, the Office of the Superintendent of Financial Institutions, has supervisory guidance for bank mortgage lending, for uninsured mortgage lending. The Minister of Finance sets the rules for mortgage insurance for mortgages where the banks come to CMHC or private mortgage insurers for federally backed mortgage insurance. The Financial Consumer Agency of Canada has guidance and supervision that it provides, including a mortgage hardship guideline that the FCAC introduced in 2023, which sets out expectations for how lenders are supposed to be identifying borrowers who are facing severe financial stress and what sorts of flexibilities lenders should be working through with those borrowers.

    You have 15 seconds left.

    I have another brief question. To what extent do you think increasing amortization from 25 to 30 years improves affordability for households?

     There are two things it can do.

    First, increasing your amortization can reduce the monthly payment on your mortgage—

    I'm sorry. We're going to have to end it there, but someone might want to pick it up again.

    Mr. Garon, you have six minutes.

    Thank you, Madam Chair.

    I want to say good morning to my colleagues and thank the representatives from the Department of Finance for being here with us today.

    In economics, we recognize that there can be overinvestment in the residential real estate sector in some circumstances. At one point, there were concerns that, with the mortgage interest deductibility in the United States, too much capital was being channelled into residential property and not enough was being channelled into other sectors. I am not necessarily talking about more productive sectors, but rather industrial, commercial and other sectors.

    Since Canadians want to become homeowners and that is important to them, they are continuing to buy houses, albeit increasingly expensive ones, and their residential property now accounts for a growing proportion of their assets.

    Is the Department of Finance concerned that this trend will result in Canadians investing less and less of their savings in other productive assets at a time when we need investments in the commercial and industrial sectors more than ever?

    Thank you for the question.

    I would say that this is something that our private sector economists, whom we rely on for surveys that inform the forecast for the department, have flagged in the past. Devoting this much capital to residential investment—and certainly, as you said, this has been noted in the United States as well—could potentially be drawing capital away from more productive uses. I think this is in line with the efforts that the government is currently making to effect a rebalancing of the housing market, where you have excessive price increases over the past decade or more that have resulted in this distortion in markets.

    As we start to see—

    I would like to come back to what you just said because it is very interesting.

    Right now, we have a government that wants to focus on increasing the housing supply, which is likely the right way to go. However, in recent years, the government has allowed longer mortgage terms and it created the first home savings account, or FHSA, which basically gives people more money through the tax system to overbid on homes, thereby overinflating the real estate market and stimulating demand.

    We are seeing a fairly drastic policy shift that is heading in the right direction. However, don't you think that the measures we have seen in recent years, such as longer mortgage terms and the FHSA, have exacerbated the problem of rising housing prices and channelled too much investment into residential real estate, which could be harmful to our growth in the longer term?

    Thank you for the question.

     I can start by saying that I think the honourable member is referring to.... There are demand-side policies that the government can take to support access to the housing market, and there are supply-side policies that the government can take. If you look at budget 2025, which the government introduced, it was focused on supply-side policies to support housing affordability, including—

    You are repeating my question. My question is this: Does the shift from policies that stimulate demand to policies that stimulate supply not amount to an acknowledgement that the government, and the Trudeau government in particular, has been taking the wrong approach for several years now?

    When an economist becomes Prime Minister and makes drastic changes to this policy, does it not indicate that the government has been taking the wrong approach for years?

    I think the government has been focused on supply-side policies for housing supply previously as well. The honourable member mentioned previously the measure to increase amortizations or to permit 30-year amortizations. That was a targeted measure to first-time homebuyers and to buyers of new builds. There was an intention there to help reduce payments for homebuyers, which is a demand-side measure, but there was also a supply-side component to it to focus on new builds.

    I have only 50 seconds left, so I will ask one last quick question.

    We know that in order to cope with unforeseen circumstances, households sometimes have to go into debt, by using a line of credit, for example. Not everyone has savings to fall back on when unexpected events, such as a job loss, occur. Does the fact that households hold an increasing amount of non-liquid assets, such as residential real estate, not in and of itself pose a risk to economic stability?

     I don't think it's fair to say.... Although the increase in the share of housing assets in the household sector's total portfolio has risen, it still represents only about 40% of the sector's assets. They have considerable liquid assets and considerable retirement assets that can be levered as well.

    Thank you, Mr. Garon.

    I rise on a point of order, Madam Chair.

    You have the floor, Mr. Garon.

    Madam Chair, I have a rather delicate matter to raise with you. As you can see, I am the only person so far who has been asking the witnesses questions in French. During my speaking time, I calculated that there was a lag of one minute and 25 seconds for the interpretation. I am participating in the meeting remotely. From the time when I ask my question and the time when the question is translated by the interpreters, there is sometimes a lag of 20 to 25 seconds. You can check. Essentially 20% of my speaking time is being taken up by interpretation lags.

    I understand and we are happy to have interpreters. Sometimes the witness waits for the interpretation and then answers me in French. However, I find it unfair that I am losing 20% of my speaking time to the interpretation lag because I am speaking French. The witnesses all need to hear the English interpretation to understand what I am saying. It seems to me that the lag is longer than usual.

    Are you asking for a little more time?

    If you would agree, I would be very pleased. Let's say we add one minute. Usually, this isn't a problem.

    I would suggest seeking consent to give me a little more time on my next turn.

    Do I have the consent of the committee to grant Mr. Garon a little more time?

    Will that be our precedent?

    I think we will see how things go with the interpretation. I understand that it is important to respect that.

    Do I have the committee's consent to give the member more time during the next round?

    The committee agrees, Mr. Garon. We will give you a little more time on your next turn.

    Thank you, Madam Chair.

    I also want to thank my colleagues.

    We are going to continue with Ms. Cobena for five minutes, please.

     The Canadian Human Rights Commission, on Canada's 7th periodic review, stated:

     Mr. Torgunrud, given that you are the senior director of economic analysis and forecasting, do you have forecasts that expect this economic trend to continue? Can you also share what key assumptions you're using for your forecasts?

     To be clear, do you mean the trend of disparity in income?

     We're talking about food insecurity, increasing levels of poverty, homelessness, etc.

     Although we are not responsible for these measures, nor can we face or answer questions on them, there have been a number of measures the government announced that are particularly pointed at these questions. Housing measures, in particular, are aimed to not only balance the market entirely but to also help out those who are more stressed. The key thing I would point out is that the Canada groceries and essentials benefit that was recently announced—

     I'm sorry, but I know about the government's announcements. I'm asking about your forecast. We have this review, which states that Canadians are facing food insecurity, poverty and homelessness, and that the standard of living is at risk, so I don't need you to dictate the government's announcements. I'm asking about your analysis and your forecast. Do you expect this trend to continue, yes or no, and what are the assumptions that you're using for your forecast?

     To be clear, our forecast is based on a survey of private sector economists, and so there's no distribution that has been built into the forecast per se. However, what we do have and do assume, and what the private sector economists assume, is that we will see a pickup in economic growth. They do believe that investments that are going to be undertaken, both by the government and by the private sector, will result in a meaningful increase in productivity, which we would expect, in turn, to lead to an increase in wages. I can't speak to the forecast aspect of this.

    What are the assumptions for those forecasts, though? Are they the government's announcements? We just talked about the GDP being flat, and then, most recently, we saw 100,000 job losses in the first two months of the year. Obviously, that unemployment rate is growing. Then, comparatively speaking about other G7 countries, we are the only one that's shrinking. I just want to understand where the assumptions are for the forecast.

     As I said, the assumptions come from the private sector economists. We are in the middle of surveying them again, but, based on their current published forecasts, they do not expect this weakness to worsen, to continue. They expect us to have an unemployment rate that's going to average about 6.5% over the coming year.

    Do you not have the information on the assumptions?

     No. These are assumptions made by the forecaster.

    Okay. That's not a problem.

    Mr. Boldt, Equifax Canada has shown that defaults are growing, not only for subprime borrowers but for more financially stable homeowners as well. They report that those with credit scores as high as 680 are struggling to pay for their homes. Is the department tracking the rise of financially stable homeowners struggling to pay their mortgages?

     The department, together with the federal financial sector agencies, have been monitoring household indebtedness as a financial system vulnerability for many years. The mortgage market plays a central role in Canada's financial system and the well-being of Canadian households, and the sound underwriting criteria that are outlined by OSFI and its supervisory guidance for uninsured mortgage lending by the Minister of Finance for insured mortgage lending are critical for making sure that consumers are resilient.

    Thank you, Mr. Boldt. We're going to have to end it there.

    Thank you, Ms. Cobena.

    We're going to continue now with Mr. MacDonald, for five minutes.

    Good morning, Chair.

    Good morning, witnesses.

    We talked a little earlier, and your comments were in regard to savings. We all went through the COVID period, and I think every household accumulated funds by not doing things we couldn't do or by staying at home. I refer to that because, prior to COVID, there were spending habits out there and debt formulas. Now that we're post COVID, we hear from Canadians about rising household debt. In your data and research, can you explain the breakdown? How much of it is in mortgage debt and how much of it is in credit card debt, the scenario?

     I think there's one overall stat, and the Bank of Canada published a research piece earlier this week that cited this. It's that about 70% of household debt is mortgage debt.

    How does that compare with the assets that people have in their homes, on a ratio basis?

    The underwriting criteria that lenders apply when they originate mortgage debt would make sure that mortgage credit is aligned with the value of the housing assets that people are borrowing to purchase.

     I don't know if you can answer this question or not, but are spending patterns changing over time in households? Is that something you track?

     In what way?

     What are people spending dollars on? Is there more going to mortgage payments? Is there less going to consumer spending in that way?

     There's no material change. There is a mechanical change. Obviously, when you have changes in mortgage rates, you can have higher spending on mortgage interest costs.

    Some lower-income groups obviously rent a lot more, proportionately, than upper-income groups, so they've had some increases in shelter costs that they've had to face as well, but I think what we're seeing is that those forces are equalizing again. Rent prices are coming down, or inflation, I should say, is coming down, and mortgage interest cost inflation is very close to zero. At this point, it's actually below the level of inflation.

    You will have periods of time where you'll have divergence in these patterns that is just mechanical, but I think we're getting back to a more balanced mix.

     In terms of the higher interest rates and higher inflation that we just lived through, both at about the same time, those would have been a large factor in rising household debt, I presume. Can you comment on that?

    Yes, it was, for those who had taken out new mortgages during that period and those who faced variable-rate mortgages, and I think this was what we were alluding to earlier about the transition that people went through already. Those who had variable-rate mortgages faced higher costs during that period. Those who had three-year fixed mortgages and renewed at the peak faced higher mortgage costs, but now we're seeing the other side of that.

    There's still some to come. There's still about 20%, I believe, of those five-year fixed mortgages that will reset at higher mortgage rates, but they're partially offset by three- and four-year mortgages that have gone from higher to lower rates and the variable folks who have been getting lower prices all along.

     You were starting to speak about some of the affordability measures that the federal government has put in, like affordable child care and targeted tax relief this year, and housing supports and the groceries benefit.

    Do we have data yet to show how those are increasing Canadians' disposable income?

     I do not have that.

    It's too soon.

    When we talk about consumption, those impacts obviously are going to have a positive effect overall. It has to increase the disposable income. Canadians are going to have a little more to devote to consumer spending.

    Yes, very much so.

    Thank you, Mr. MacDonald. That concludes your time.

    We will continue with Mr. Garon.

    Mr. Garon, the committee has unanimously decided to give you an extra minute.

    Thank you, Madam Chair.

    I want to thank my colleagues for their understanding. I really appreciate it.

    In recent years, many people have said that the rapid population growth caused by immigration and other factors combined with a housing supply that has not kept pace may have put upward pressure on housing prices, because the number of homes available in the short term is fairly fixed.

    As of late, the government has been boasting a great deal about having brought about a decline in the population for the first time in Canadian history. At the same time, we are seeing a slight ease in the housing market. Do you think that one has had an impact on the other?

     I think it's clear that the demographic impulse we saw, particularly the increase in temporary residents, did have a meaningful impact. I think we saw it probably more in the rental market than we did in the homeowner market, but we saw it there as well.

    You're absolutely correct that population, on a year-over-year basis, was negative for the first time this quarter. I believe most economists think this will now have the opposite impact on house prices going forward.

    I have a question on another subject.

    We are in the midst of an oil shock. We know that the war in Iran is causing a significant supply shock. Stéphane Marion, from the National Bank, recently indicated that never before in the history of Canada or even in the history of the industrialized countries has there ever been an oil shock of this kind without interest rate hikes from the central banks. It appears as though the Bank of Canada is currently taking a more cautious approach.

    I would like to know whether the Department of Finance expects interest rates to go up and whether it has prepared contingency plans to respond if interest rates do rise, as has been the case with all the other oil shocks in Canadian history.

     I can't speak for the actions of the Bank of Canada, obviously, but what I—

    No, but do you expect interest rates to rise at some point?

    You can plan ahead. The entire financial sector is anticipating what the Bank of Canada will do. Contingency plans are being prepared. That is the Department of Finance's job. We have never had an oil shock without an eventual hike in interest rates.

    Do you expect it to be different this time given the uncertainty we are facing?

     Yes, you're right. We have financial market expectations for interest rates that are based on futures and other indicators, and they do point to markets expecting an increase of at least 25 basis points from the bank, and potentially 50, over the next year, but there's a lot of uncertainty when you talk to economists about this. There's a great deal of uncertainty about the resolution of the conflict, about the opening of the Strait of Hormuz, about the length of time the interruptions are going to last, and—

     Thank you, Mr. Torgunrud and Monsieur Garon. We're going to have to end it there.

     We will continue now with Mr. Stevenson for five minutes.

     Thank you. This is the first time I'm able to actually ask questions in the finance committee, so I welcome the witnesses.

    I'm going to start at a very high level.

     You mentioned a couple of things, Mr. Torgunrud. You mentioned that the Minister of Finance was giving direction. In your opinion, which way is the information flowing? Is the minister asking you to come up with certain policies, or are they saying, “This is my direction. I want you guys to give me the background as to how I'm going to get there.”?

     I can only speak in general terms to how the department typically works and how we advise.

    We research in our areas—

     I'll maybe point it a little further.

    My thought—and you can just say yes or no to this—is that the direction from who's at the top has changed from what it was in the former Trudeau government. Now they're giving you the direction, and you're just filling in the background as to how they can get there. Am I correct?

     I would respectfully disagree. Our role is to provide balanced advice and to provide the best options that we feel are appropriate.

    Okay. I'll just go into some specifics.

    I think Mr. Boldt mentioned earlier that the government's policy to address affordability—changing the 25-year mortgage period to a 30-year period—was to assist in affordability. Would you not say that this policy actually allows people to buy a more expensive house, which means they're going to have a higher spending ability, when increased rates often mean they might then be overextended because they were able to buy it before at a different rate? Does that not put them in a more precarious position than if they had stayed at the 25-year amortization period?

     I can respond to that.

    I alluded to this earlier as well: There are two things that your amortization can do.

    When you move from a 20-year to a 25-year amortization or from a 25-year to a 30-year amortization, it allows you to reduce your monthly payments on the loan. Let's say you were going to take a mortgage of $500,000. If you take a longer amortization, it will reduce your monthly payment for that mortgage.

    I think you're also right that if you're a borrower and you're looking at the type of home you can qualify to purchase, taking a longer amortization could make it manageable for you to purchase a more expensive home, since it reduces your monthly payments.

     Then the rules the government sets can affect how much debt the average consumer gets into. When the economy changes, interest rates go up, and the policies that were set are not going to be the same. Consumers are going to be overextended if they were at their maximum at the time when they had a 30-year mortgage and the reduction from it.

    That's right.

    The maximum amortization is one of several parameters that OSFI looks at for uninsured lending and that the minister looks at in the ministerial regulations for mortgage insurance.

    The other parameters include, for example, the minimum down payment requirements and the maximum debt service ratio, meaning the maximum amount of your monthly income that can go towards your mortgage payment.

    There is also the minimum qualifying rate, also known sometimes as the “stress test”, which basically looks at whether a consumer will be able to handle those payments if interest rates increase or if they face some other economic disruption.

    Just to be clear, the government policy with regard to mortgage rates dramatically affects what somebody can afford, which means it can affect the consumer. The government policy on this—

    Thank you, Mr. Stevenson. That concludes your time. Thank you.

    We will continue now with Mr. Turnbull for five minutes.

    Thanks, Chair.

    Thanks to the witnesses for being here today. I appreciate your expertise in answering our questions.

    You said at the beginning that household debt is elevated, but you also said it remains broadly in line with historical averages. Can you square that circle for me and help us understand what the historical averages are that you're referring to, and how we are still within that band?

     I apologize. I was not clear in what I said.

    What I intended to say was that the measures of stress related to debt—the arrears reported, the insolvency rates reported—are at their historical average. Household debt is rising as a share of income and relative to peers.

     Okay, good. That's helpful.

    In terms of mortgage debt, we're monitoring insolvency and credit default risk. That's basically people's inability to service the debt that they are accumulating, and that's still within the historical average. Is that because people have more room to service that debt, or...?

    Help us understand that. I think that's what you said, but I just want to tease it out a bit more to make sure I understand.

     I think, from my perspective, that's very much true.

    To come back to the concept of net worth, it's basically that households have four times more financial assets than they do debt, and they have the ability to bridge periods of income loss, to be able to manage in other ways, to reallocate spending. At the same time, we saw this big dip in arrears and insolvencies during the pandemic, and this was related to government support.

    There's a lot of talk of increase in arrears, and you can have some heroically high percentage growth numbers, because it's coming from a very low level. It went far below normal, to record low levels of insolvencies, during the pandemic. What we've seen is a return to normal, and it is even possible that you will see a bit more, because some share of that population likely would have gone bankrupt had the pandemic not happened.

     It's one of these statistical things that depends on what you're comparing to, what time period you're comparing to. If you go back far enough, you can see that it's within an average band, but if you compare it to pandemic lows, it seems quite high. That's what you're saying.

    That's it exactly.

     The other thing that strikes me is that Canadians have quite a bit of equity tied up in their homes, and I think this relates to another colleague's questions. I'm trying to understand the percentage of debt that Canadians are carrying and the amount of equity that many Canadians—not all of them, but quite a number of them—have in their homes. Can you speak to that at all?

    I view a home largely as a savings account. As you're paying your mortgage, obviously there's a percentage of interest, which is painful to have to pay, but people are saving money in their homes. That's part of their financial security, and if they ever had to, that's something they could leverage in order to get through difficult times.

     Yes, I think that's broadly correct.

    Mortgage debt is correlated to the value of your house. When you go for an uninsured mortgage loan, you cannot take out a loan that is larger than 80% of the value of the house. If you want to purchase mortgage insurance, you can get to a 90% loan-to-value ratio, or even as high as 95% for homes under $500,000.

    The mortgage credit—and this is one of the strengths of our financial system—is the sound underwriting criteria that lenders apply to mortgage loans. That mortgage debt is increasing, but so is the value of the housing assets—or historically, they have increased—so there's a correlation there.

     That's helpful.

    Are Canadians comparatively—

    I apologize, Mr. Turnbull. That is your time. Thank you.

    We'll continue now with Mr. Hallan for five minutes.

     I'll split my time with Mr. Kelly.

    Officials, thank you for being here.

    With regard to Canada's standing in the G7, where does Canada sit when it comes to household debt?

     We have the highest household debt-to-income ratio.

    It's the highest in the G7. Wow.

    When did our ranking get there? Do you have any idea?

    I believe it was within the last 10 to 12 years, but I don't have the stat directly at hand.

     Okay.

    You mentioned the debt-to-income ratio. Would you say that has gone up in the last 10 years?

     Yes.

    How much has it gone up?

     Again, I don't have the stat directly at hand. I can follow up on that.

     I have a stat here. It's up to 177% now.

    What does that mean for Canadians? If you're earning a dollar.... What does that mean for how much Canadians are in debt for every dollar that they earn?

     The simple math is $1.77, but I think it's—

    That's what each Canadian owes for every dollar they make.

     Yes.

    One notion is that it's a stock, and another is that it's a flow. It's not as though you have to repay your stock of debt every year.

    The debt-to-income ratio has gone up, and Canadians basically owe more than they make. Am I correct?

    They also own far more than they make, four times as much as they make.

     Our debt levels also have gone up significantly. Am I correct?

     That's correct.

    Okay.

     Are consumer insolvencies a concern? Are they trending upward right now?

    As I mentioned, they have trended up from the record lows they hit in the pandemic, but they have really just returned to the pre-pandemic historical average, which is extremely small. We're talking about 0.2% of the population.

     According to the Canadian Association of Insolvency and Restructuring Professionals, these kinds of insolvency levels haven't been seen since 2009. It's the second-highest level since the Office of the Superintendent of Bankruptcy started tracking proposals. Unlike in 2009, the insolvencies are driven by cost of living, as opposed to high unemployment.

    Is there a concern with that? Is that something you guys are seeing as well?

     I can make one point there.

     We were talking about mortgage debt earlier. I think you're talking about broader consumer debt. I'm thinking of the Bank of Canada's financial stability report published in 2025, which did look at different types of borrowers. It did identify that for borrowers without mortgages, there were some increasing signs of “financial stress”.

     Definitely, and would it not be a huge concern that unsecured debt is going up?

    You mean credit cards and that type of borrowing.

    Yes. That is exactly my point. The more we talk to our constituents, that's the concern we hear. Food bank usage has gone up to 2.2 million visits a month. Does this not coincide with, let's say, higher costs at the grocery store? Canada does sit at the highest level of food inflation in the G7.

     Are you guys seeing this trend as well? Are these things coinciding with each other?

     Certainly, and not to be just a broken record here, but I think this is very much in line with the policies the government is introducing to try to address specifically what you're talking about.

    Mr. Torgunrud, let's talk about the policy.

     We know that Canada's food inflation is the highest in the G7. You work for the finance department. Would you not think that any input into food going up would make the cost of food go up, and food would cost more at the grocery store?

    Thank you, Mr. Hallan. That concludes your time.

    We will continue with Mr. Leitão for five minutes.

     Thank you.

    Good morning, gentlemen.

    Thank you for coming.

    Oh boy, we've talked about a lot of things today so far. We'll continue.

    Before I get to some questions—I am a little excited that I finally get to speak—I would start by saying that Canada has a stable, robust and well-regulated financial system. People do worry, and there are reasons to worry about levels of indebtedness, but the system is robust and well-regulated and can handle this pressure.

    Here is my first question, if you will. A lot of folks were extremely anxious a few years back about what was then described as the mortgage “Armageddon”. Mortgages were resetting from the incredibly low levels of the pandemic to the levels of 2022-23, and folks were anxious that there would be a huge explosion in mortgage defaults, which did not happen. Could you elaborate a bit on that and why you think that was the case?

     I would agree with your assessment that the financial sector is very well regulated. The mortgage underwriting criteria that lenders use are very robust. Criteria such as the minimum qualifying rate, also known as the stress test, made sure that borrowers, when they took out mortgage credit, were resilient to some adverse changes in circumstances. I think that was one of the key reasons borrowers were able to absorb the interest rate increases that happened in that 2023 period.

    Yes. Thank you.

    You also mentioned earlier that when we look at the mortgage market.... I talk about mortgages because, as was also pointed out, 70% of household debt is mortgage debt. As we all know, behind every mortgage, there's an asset. There's a house. I'll get to that after this, if I have time.

    You also mentioned that in the context of rebalancing the housing market, there are supply-side measures and there are demand-side measures, and that now the government is focusing a lot more on supply-side measures. Could you elaborate a bit on that and where that will take us if we continue in the direction of focusing on supply?

    Yes. Again, I can refer to budget 2025. One of the key themes was supercharging homebuilding across the country, with the focus on restoring affordability by addressing the supply gap.

    Just quickly, one of the key measures there was the launch of Build Canada Homes to build affordable housing at scale and to focus primarily on non-market housing. I know that the Department of Housing, Infrastructure and Communities is responsible for leading that initiative.

    There are other discussions happening about Build Canada Homes. I'll leave it there, but if you have further questions....

     Mr. Torgunrud, you were mentioning something that I think is really important and we should really understand as we talk about household debt, and that's the difference between stocks and flows when one talks about debt and debt servicing. Your time was up and you couldn't continue.

    Could you perhaps elaborate a little on that, on why it's important to really notice that there is a big difference. When one makes comparisons, one has to compare apples to apples.

     It's true. I think from a flow-flow perspective, if you're talking about the ability to service debt, debt service ratios are a better metric of that, as well as these metrics that give you some sense of the actual stress that's being reflected in the market. They are much better indicators.

    As you mentioned, we have a very sophisticated financial system, a very secure financial system, and that means Canadians have a lot of options for a lot of different types of products and ways to borrow, ways to smooth their consumption over time, which means high debt, per se, is not a bad thing relative to income, necessarily.

    Thank you, Mr. Torgunrud, we'll leave it there.

    Thank you, Mr. Leitão.

    To conclude this hour, I will now give the floor to Mr. Garon for two and a half minutes.

    Thank you, Madam Chair.

    Gentlemen, since the start of its mandate, the government has put a lot of emphasis on creating a single Canadian economy, reducing interprovincial barriers and the importance of labour mobility. The government has stressed that.

    I get the impression that rising house prices could actually reduce labour mobility. I get the sense that some people are trapped in their homes. First, there is the price of houses themselves. Then there's the fact that some people are seeing a drop in the price of their house right now and have a lot of debt tied to the house, which could prevent them from selling. Fixed costs are often proportional to the price. Brokerage fees, welcome taxes and the cost of renovations have increased. I also sense that a lot of people feel somewhat trapped in their homes, and also trapped in their housing, because housing prices are regulated, particularly in Quebec. When you move, the price goes up.

    Have you ever assessed the impact that has on labour mobility, on the ability to adapt, change regions or move, among other things? Is that something the department is concerned about? If the department is concerned about it, are there any measures that could be taken to address the problem in part?

    I'm not aware of any measures or anything that is undertaken in the department along those lines. I understand what you're saying, that this could potentially be a barrier, but I do not believe that there are any proposed measures to alleviate this.

    I think that could be a good avenue to explore. I want to throw that out there very quickly.

    I also get the sense that household incomes in recent years have not kept up with house prices. Aside from all the demographic challenges, does the fact that revenues haven't kept up with price increases to date explain the market adjustment we are seeing now? Does it contribute to that?

     I'm sorry. I didn't catch the tail end of the question.

    Madam Chair, can I have my time back if I repeat my question?

    No. Repeat it, but—

    I understand that the interpretation didn't work, that the witness didn't understand the question and that I just lost a minute of my speaking time.

    You didn't lose a minute of your time; it was 10 seconds.

    That concludes the round of questions. Thank you.

    I would like to thank our witnesses for this hour.

    We will now briefly suspend as we change over to the next hour.

     We are going to resume the meeting. Thank you very much, and welcome back. I would like to welcome our witnesses for the second half of this meeting.

     We have Sue Hutchison, president and chief executive officer of Equifax Canada. Joining her is Rebecca Oakes, vice-president of advanced analytics.

    We also have, from TransUnion Canada, Matte Fabian, senior director of research and consulting, and Clarke Cross, director of government relations.

    I see that Mr. Garon has a point of order.

    Madam Chair, you won't be surprised by the nature of the point of order. In general, things are going smoothly with interpretation and there are no worries. I commend the interpreters for their work. They're doing an amazing job.

    I just want to point out to you though that, when you have two and a half minutes, you're a member of the second opposition, and you ask a 30-second question and, because of an issue with interpretation, the witness doesn't hear the question and you have to start over, you've lost 50% of your speaking time on that. In addition, I would like to point out that, if we look at the videos, and I might invite you to do so, all the anglophone members who ask questions of anglophone witnesses don't have that problem and get an immediate answer.

    I agree that it's easier when you attend the meeting in person, but today, there's an issue with that. In the last round, the time to ask the question wasn't considered, as well as the time to ask it again. I think that's detrimental. I just wanted to say that and I won't spend an hour on it. There are witnesses and I want to respect the fact that they are here.

    Last week, we celebrated the International Day of La Francophonie. Members rise in the House and make a show of saying that the francophonie is important, but you have to live it on a daily basis. For me, it's a question of the official languages.

    As a member of Parliament, it is not normal for me to get 10%, 15% or 20% less speaking time when the witness does not speak the same official language as I do, does not understand the question and I have to take 40 seconds to ask it again because there was some interference over which I have no control. I want to make you aware of that.

    To conclude, I am not asking for a privilege. I'm not asking for more speaking time than anyone else. I'm not asking to ask more questions than what is stipulated in the Standing Orders or the motion from the start of the legislature. I would however rather not have any less time for reasons that are purely technical and beyond my control and that prevent me, as a francophone, from doing my job as a parliamentarian in accordance with the motion adopted at the beginning of the legislature.

    Okay. Thank you, Mr. Garon.

    I will take that into consideration when we continue with the questions—

    Thank you.

    —and I'll make sure that the witnesses can understand and that you can as well.

    Thank you for raising that point of order.

    With that, I would like to invite Ms. Hutchison from Equifax Canada to begin. You will have five minutes for your opening statement.

    Thank you.

     Thank you very much.

    Good afternoon, Madam Chair and members of the committee.

    Thank you for inviting me to speak to the committee today.

     As a bit of background, Equifax manages the largest consumer data trust in Canada, representing 30 million Canadians and receiving over 200 million records monthly from lenders, government, telcos and other data furnishers. Combined with Canada's largest commercial credit database and Canada's only fraud consortium, we offer a unique vantage point on the Canadian economy.

     Every day, financial institutions, telecommunications providers, governments and small businesses rely on our data ecosystem to make critical decisions. From a young newcomer establishing their credit footprint to participate in the Canadian economy to a family managing mortgage renewals in a high-interest environment or a local entrepreneur seeking the capital necessary to drive growth, we securely chronicle the financial life cycle for Canadian people and businesses.

     Equifax operates a fully modernized cloud-native architecture with full data resiliency, meaning that data is controlled, processed and stored in Canada. We do not rely on lagging macroeconomic indicators, as our data is real time, allowing us to detect emerging economic trends as they happen.

     As we monitor the pulse of the economy, we're also acutely aware of the shadow credit market, which often eludes traditional reporting. Historically high-growth sectors, like “buy now, pay later” and private mortgage lending, operated in a regulatory blind spot for quite a long time. Today, Equifax is leading the change in bringing this invisible debt to light. One of our very important goals at Equifax, and my personal passion, is increasing financial inclusion by leveraging a broader set of alternative data, like rental payments, for example. We're aiming to close these visibility gaps by gathering differentiated data under our regulated framework to complete the picture necessary to increase financial inclusion for consumers and improve access to capital for small and medium-sized enterprises in this country.

    As this committee studies household debt, data-driven policy-making has never been more critical, so our goal today is to help ensure that your recommendations are grounded in the most granular and definitive insights.

    The way Canadians use and leverage credit has shifted really significantly in recent years. During the pandemic, as we heard in earlier comments, we observed a period of lower credit utilization, allowing many Canadians to reduce household debt and boost savings. The percentage of consumers missing a credit payment dropped by over 35% during this time, hitting its lowest point in mid-2021. However, as we exited that period, the ripple effect of inflation, increased unemployment and rising financial costs resulted in a noticeable impact on credit commitments, and we observed a much more severe impact on certain customer groups, particularly younger and lower-income earners. During 2025, missed payments showed signs of stabilization as the effects of lower financing costs began to materialize. By the end of 2025, the percentage of consumers missing at least one credit payment settled slightly above pre-pandemic levels.

    However, these overall numbers conceal an underlying divergence in financial performance, often referred to as the K-shaped economy. This becomes visible only when we disaggregate the data, so the averages I've been listening to do not reveal what's really going on.

    Headline measures like the debt-to-income ratio grab attention, but our real-time insights reveal that Canada's credit challenges are far more concentrated and severe than the surface numbers suggest. The debt-to-income ratio across Canada has risen for several consecutive quarters, with the lowest-income group showing debt-to-income ratio of over 428%, compared to 130% for the highest earners.

    The high incomes of wealthier populations, which also tend to have a low debt-to-income ratio, tend to skew the overall vantage point, leading headline numbers to severely understate the severity of the problem for certain segments. For context, when we exclude the top quintile of income earners, the debt-to-income ratio is actually over 200%, compared to the headline figure of 173%. This strain is echoed by the banks—

    I'm sorry, Ms. Hutchison. Could you wrap it up, please?

    Sure.

     Financial stress is not limited to younger or lower-income consumers. The combined effect of high interest rates on high-balance mortgage renewals in Ontario and B.C. along with the impact of economic conditions on unemployment levels has led to rising—

     Thank you, Ms. Hutchison. We're going to have to end it there, but I'm sure members will be delighted to ask you more.

    We're going to now continue with Mr. Fabian, I believe, from TransUnion.

     Madam Chair, I'm going to open our remarks, if that's okay.

    The Chair: Go ahead.

    Clarke Cross: Good morning, Madam Chair. My name is Clarke Cross. I'm the director of government relations for TransUnion Canada. I'm accompanied by my colleague, Matt Fabian, TransUnion's senior director of research and consulting.

    We're pleased to be invited here today pursuant to the finance committee's interest in understanding how Canadians are managing credit debt. To help guide the committee and generate discussion today, we've taken the liberty of providing you with a package of data exhibits, which you should have before you now. Before I pass things over to Matt, I want to say a few words about TransUnion.

    TransUnion is a leading provider of credit information services. For businesses, we verify consumers' credit applications so that businesses can make accurate decisions about an applicant's creditworthiness and thereby reduce their financial risk. For consumers, we provide resources to help them manage their credit health.

     TransUnion maintains information on consumers furnished by data suppliers, mostly financial institutions from across Canada. Importantly for understanding the scope of our testimony today, we do not collect information about income, savings or cash flow.

    Without further ado, I'm going to turn things over to Matt, who's going to take you through the numbers.

     Thanks, Clarke.

    Thank you, Madam Chair.

    My remarks draw on comprehensive consumer credit data covering over 30 million credit-active Canadians and reflect conditions through the fourth quarter of 2025.

    Household credit debt in Canada continues to grow. The pace of growth has moderated materially compared with the immediate postpandemic period, but we are still seeing continued growth in household debt. As of the fourth quarter of 2025, total outstanding consumer credit debt reached approximately $2.6 trillion: a 4.3% year over year increase. This was broad-based across major credit products and across all risk tiers.

     Mortgages remain the dominant component of household debt, with outstanding mortgage balances rising 4.3% year over year to roughly $1.9 trillion, while non-mortgage debt increased 4.4% to approximately $685 billion. Critically, this growth is not driven by an expansion in borrowers—the credit-active population grew only by 1.2%—but rather by large average balances per borrower, particularly in housing, auto finance and revolving credit. This distinction matters, as credit expansion today reflects affordability dynamics and balanced growth rather than broad-based credit loosening.

    The recent evolution of household credit in Canada was defined by rapid synchronized increases in both inflation and interest rates, as has been mentioned, the combined impact of which created higher debt servicing costs and forced some households to utilize cash flow away from debt repayment. Crucially, this wallet stress was not evenly distributed. The resulting payment shocks were real but concentrated. At the peak of these pressures, TransUnion estimates that payment shocks contributed to missed payments among approximately 10% of active credit households, while the majority of Canadians continued to demonstrate financial resilience. That 10% was a very significant subset demographically. As has been alluded to, younger consumers and Canadians new to credit tended to have more severe impacts.

    Several structural shifts also merit the committee's attention. The Canadian credit landscape is bifurcated, with growth concentrated at the prime and superprime ends of the risk spectrum. Additionally, the demographic composition of credit balances has shifted. Gen Z and millennial consumers combine to hold almost 50% of outstanding debt. Much of this debt, especially among millennials, is mortgage debt. Second, the most significant pressure point has been cash flow burden rather than credit access. Average minimum monthly payments rose 3.5% across all products, led by growing average mortgage payments reaching over $2,500. This underscores meaningful affordability strain, even where credit performance remains technically sound.

     Delinquency rates rose steadily through 2024 and started to stabilize in 2025. Mortgage delinquency remains exceptionally low, underpinned by strong equity positions and the mortgage stress test framework in place since 2018. Notably, balance-level delinquency has increased faster than consumer-level delinquency, indicating that while relatively fewer consumers are delinquent, those who are tend to carry larger outstanding balances. This points to concentrated stress rather than broad-based financial stress. Notably, younger borrowers, who carry higher balances with fewer financial reserves, are exhibiting slightly higher rates of delinquency. Younger mortgage holders are particularly exposed, given higher loan balances and the cumulative impact of elevated home prices.

    In interpreting delinquency trends, it's also important to acknowledge the role of fraud, which is often embedded within reported credit losses and can therefore be misattributed to consumer financial hardship. Our latest analysis indicates that up to $400 million in annually reported delinquent balances is attributable to fraud rather than genuine consumer hardship, conflating the two risks and mischaracterizing the true state of household financial stress, a distinction that matters for sound policy.

     In summary, household credit growth continues but at a moderated pace and with improving stability. Systemic risk remains contained. The majority of Canadian households have shown considerable resilience, but as economic conditions continue to change, we continue to monitor these, especially those stressed segments, and continue to report.

     Thank you, Mr. Fabian. We're going to have to end it there. Thank you very much.

     We're going to begin now with Mr. Kelly for six minutes.

     Thank you.

    In my career prior to politics, I read many thousands of reports from both of your organizations during my 21 years in the mortgage business. I thank you for the work that you do for Canadians and for the financial services industry.

     I want to talk today about consumer indebtedness. In the officials' statements in the previous panel, they said that they attributed the absence of broad default to households' spending less on other things, to households' refinancing existing debt and to households' exhausting their savings. There is no increase in per capita GDP, so we don't have an increased ability of people to pay. We just have a shuffling of debt responsibility.

    I'll let each of you answer this. Do you have data to support that assertion, and can you break down refinancing activity versus...? Well, that would be the one you could see, so perhaps talk about refinancing.

     Rebecca can take this.

     I certainly can speak to the data points that we see here at Equifax.

    I have a few things to call out.

     As Sue mentioned a little at the beginning, the aggregate numbers do sometimes mask what is truly going on behind the actual data underneath.

     With regard to your question about refinancing and what's happening, when we look at the mortgage market in particular, we have seen that, yes, although missed payments on mortgages remain quite low across Canada, there are subgroups of that population in which stress is still evident. For example, high-balance mortgages in Ontario and B.C. are at levels that are much higher than we saw before the pandemic. When we look at some of those other elements.... For example, on the younger consumer side of things, we have seen missed payments rising, particularly on products such as credit cards. There definitely is a growing risk across some segments of the population.

     Can you get in on that?

     I would largely agree with that. We've seen that mortgage payment shock, as we'll call it, has impacted consumers. We haven't seen, necessarily, delinquencies on the mortgages, but we've seen higher delinquency rates on other products that those mortgage holders own.

     Also, I would say that we are seeing compressed.... When we look at our payment data, we do see compressed the ratio of how much payment over the minimum payment a lot of consumers are making.

    Mr. Fabian, in your remarks you said that the number of mortgage customers is not growing, that the overall credit is growing but not the number of participants. In other words, the same people are just getting deeper into debt. Is that correct?

     Yes, it's broader than mortgages, but we are seeing the volume of credit participation in Canada start to flatten out as immigration levels drop.

     Okay. You're saying that that's across the board and not just with mortgages.

    Yes, that's correct.

    The number of borrowers is not rising. It's simply that the balances are rising.

    The balances are rising faster. That's correct.

     Okay. What are the implications of that long-term, if incomes are not keeping pace?

     A lot of that debt is mortgage debt. Again, it's the stock-versus-flow conversation that happened a little earlier.

    Certainly, if we see increases in non-mortgage balances and non-mortgage delinquency, it becomes a concern, and we are starting to see that in small pockets of consumers across Canada.

     Okay, but even with regard to mortgages, if people who borrowed at record lows in 2021 and are dealing with a higher interest rate environment are coping with that by simply spreading the loan out over a longer period and/or borrowing more—maybe they're doing both, borrowing more and spreading it out over a longer period—at a certain point, that is not sustainable. How many times can a consumer really expect to do that, especially in an environment where per capita GDP is flat and has been flat for 10 years?

     I would say that we haven't seen yet a material increase in that happening. It is a concern.

     All right.

     You've talked about the headline number, which actually seems alarming enough to me: 177% debt to income. That's higher than in almost all of our peer countries. It's the highest in the G7. The headline number itself seems alarming, but all of you testified to say that it's actually quite a bit worse than that, because if you subtract the highest quintile of income earners, it's more like...I think the number was 428% debt to income.

    Again, incomes need to rise significantly to get out of this. Without rising incomes, this hits a brick wall sooner or later. What concerns do you have about how important it is that we have a more productive economy with higher wages, higher earnings, so that people can grow their earnings into the debt they already have?

    Unfortunately, you're going to have to answer that in another question, potentially, because we have to move on.

    Don't I have six minutes?

     Yes. You had six minutes.

    We will move on now to Mr. Leitão for six minutes.

    Six minutes. Thank you. I will speak very fast. No, no....

    Thank you for being here.

    It's very interesting data that you have supplied to us. In particular, reinforcing what was said before, Canada's credit market is still functioning well. Most household debt is mortgage debt, and that debt is mostly being serviced on time.

    However, there are issues out there, so let's talk about that. You mentioned the K-shaped recovery or economy. We've had many alphabet cycles: the L-shaped recovery, the U shape and the V shape. Now we have the K shape, which I think is a fair description of what is going on, in that the economy has recovered but we are not all benefiting from that recovery. Some segments of the population are indeed in trouble. They are facing high cost of living issues, and they are getting deeper into debt.

    I think, from what you and the officials before have said, that something in the range of 7% to 10% of households are the ones on the lower end of the K. They're the ones really experiencing trouble. You see that, I think, in your real-life, real-time data.

    First, do you agree with what I've been saying here? If so, what do you suggest we recommend as measures to really focus on that 7% to 10% of households that are getting further into debt?

    I do agree. I would say that when we look across our risk tiers, we are seeing a bifurcation, almost a K shape happening there, where prime borrowers are moving away from the middle. They're either moving to the extremes of going up towards superprime and really good credit quality or moving downward. We're seeing a bit of a barbell shape happening. It's happening a lot in the U.S. but not quite as much yet in Canada.

     I think, to your point, that early warning signals are something we talk a lot about with the lending community. There's a lot more financial information out there. A lot more consumers are monitoring their credit. There are free credit monitoring services, and we are seeing that have a positive effect. I think that to address that bottom 10%, it really comes down to the kind of financial assistance and financial advice we can give those consumers to help support them, and also to how we can identify those conditions earlier, before they get to that end spot.

     I'll let you also get into this, but what about the subprime segment? Is it well regulated or not regulated at all? What else could we do to make sure that subprime doesn't transform into something worse?

     I'll be quick, because I want to give my colleague her time.

    There are different reasons people are in subprime. The journey into subprime is something we're looking at right now. People often start their credit journey below prime because there's a thin credit history, so there's not a lot known.

     There are people who might have had one major derogatory event, like a bankruptcy, and they're coming out of it. They're improving, but they're still in subprime as a result. The journey and how you got to subprime is also a big factor in how we can solve that problem.

     I would add that a huge percentage of Canadians don't have any credit history. They have what we call a thin file, so they can't actually participate.

    The debt-to-income ratios you're looking at don't include a lot of the subprime and private lending segments. I think bringing those to be regulated.... We're seeing a huge growth in buy now pay later. In other jurisdictions, like Australia and the U.K., they're regulated to report to credit bureaus. We don't have any information, other than some of the larger loan amounts, in that whole area of credit—which is typically for young people—nor do lenders. That's a real blind spot. Private mortgage lending is a real blind spot.

    Debt is moving as the banks get tighter with their origination policies. Canadians are being pushed into these other channels, which we don't have any visibility on. That's where I would be concerned.

    I agree with Matt that a lot of it is about education, financial literacy, and understanding your score and how to make it better, but there's a real issue in Canada with this group of Canadians. Whether they're young, have had a credit event or are newcomers, they're not playing in any of these areas. They can't get a credit card. They certainly can't get a mortgage. Most of them are renting, if they're lucky.

     In some cases, they have high interest rates.

    On that, do credit agencies have reliable information on rent payments?

     We have a huge program. We started, probably 24 months ago, getting rental information. This is a pretty fragmented market, so we're working through aggregators and through some of the lenders to generate the data.

    Thank you, Ms. Hutchison. We're going to have to conclude that there.

    Mr. Garon, you have the floor for six minutes.

    Thank you, Madam Chair.

    Welcome to the witnesses.

    To the ladies from Equifax Canada, a few years ago, there was a problem with my financial institution. It lost my data and then opened up an Equifax file for me, but under the wrong name. It was not my correct name. I was told to call Equifax and try to get them to correct my name. The Equifax people asked me to send faxes and documents. I never got an answer. To date, I have a credit file in the wrong name. When I look up my credit file under the wrong name, there are old loans that I repaid long ago. The file is not up to date. It shows all kinds of old data.

    Now you're giving us data quarterly. What is that data worth?

    What are they “worth”? Was that the last word there?

    Yes.

     We are a data trust. We take information security, accuracy and integrity very seriously.

    We are an ecosystem. We get, as I said, about 200 million pieces of information every month. Sometimes it's incorrect—less than 1% of the time. We do our best to make sure that that information is correct. In terms of how long things remain on a credit file, that's really regulated, so we have to hold certain things for certain amounts of time.

    I apologize if you've had an issue. Now that you've met me, you can email me, and I'll take care of you.

    I will not use my status as an elected official to get better service. I just wanted to say that you have so much real-time data that sometimes I wonder about its reliability. You're saying that I'm part of the 1% of people affected. So that's unlucky.

    Many groups, including the Canadian Credit Agency, rely on a 2004 study that found that only 79% of credit files were accurate and that more than one-fifth of the files contained inaccuracies. That is a study from 2004. Since then, the world and technologies have changed. What progress have you made in correcting those mistakes?

    I am asking because, before we use any data, we always wonder how accurate it is. Mr. Leitão and economists know that very well. In the case of credit agencies, I always have that doubt. Do you agree with the statistic that one in five credit files is inaccurate? Do we still have to use that statistic, or can we use your 1%?

    I agree with you. Technology is a lot different now from what it was when that stat was created, so I would suggest that's a pretty high number. I don't think that's accurate today. We're using market-leading cloud AI technology to make sure files are clean.

    It is an ecosystem. We report what we receive. We don't make up the credit profiles. We're reporting what lenders and others in the ecosystem are providing to us. It's a team sport. There are a lot of organizations and stakeholders that create our data.

    I appreciate that and I don't question your integrity at all. That's not what this is about. I know it's an ecosystem and that you do the best with what you have. I was talking more about the speed of execution of the ecosystem itself. I want to make that very clear.

    I would like to ask you a question about debt and the fact that customers are being encouraged to take on debt.

    Last year, the Journal de Montréal reported on the case of David Tregear. He was a man in Victoria whose credit rating was downgraded from 700 to zero, not because he had taken on too much debt but because he had no debt. There are a lot of people who criticize the credit rating system used by Equifax and TransUnion as well, saying that it encourages people to take on debt. If you don't have any debt or don't have a credit card, your credit rating is low, generally speaking, according to the calculation. With the current housing shortage, homeowners are increasingly using credit scores to assess people's ability to pay their rent.

    Aren't credit ratings a tool that is sometimes used the wrong way by the wrong people?

     It sounds like a question for you, Matt.

    Yes, in those cases, I would say to think of a score as a point in time. It creates a layer of transparency. For somebody who has a thin file or has zero credit history, we still score them. I think both companies still will provide a score, but it's based on a very limited amount of data that we've reported. We're still trying to create some transparency for a lender to say, “Based on what we see, here's the perceived risk of that consumer.” The less information there is, the less we can offer in terms of probabilities—

    I'm going to interrupt you, because I understand that role. What I wonder is whether credit ratings aren't sometimes used by the wrong people in the wrong circumstances, such as the case of a landlord who wants to rent to someone.

    Are they still the right tool?

     I would suggest, then, that an absence of that would create a different kind of risk for a lender or a renter.

    Are they the right tool for an owner though?

    To that, I would say that the permissible purposes and uses for credit reporting information are well established through provincial statutes, and that there is a need for people to have trust between not just lenders and borrowers, but landlords and tenants. Credit information is used in those circumstances to reliably screen and select tenants.

    Thank you very much, Mr. Cross.

    Thank you, Mr. Garon.

    We will continue now with Ms. Cobena for five minutes, please.

     Thank you, Madam Chair.

    Thank you to our witnesses for being here. I was an adjudicator at one of the big lenders before I took on this role and looked at your reports on a daily basis. You're bringing back a lot of memories.

    To start my questioning, Ms. Hutchison, the headlines right now are that the household debt-to-income number is around 177%. What I found remarkable in your remarks was that when you break that number down and you take out the top income earners, the number is worse. You mentioned something along the lines of 428%.

     That's important to understand, because of course we're doing this study not because we're worried about the top income earners but because we're worried about those who are struggling. We're trying to understand why and where the trend is going and how we can best respond to that. Can you expand and elaborate a bit more on the 428%?

    Yes, and I'll let Becky give you more details.

    We referenced it about the savings rate. One thing to think about is that it's really the top 25% of Canadians. Think about the excess savings we heard about through COVID. That is not broadly spread. That is sitting at the top, with the most wealthy Canadians. When you think about the debt and who can manage what, savings are playing into it, except not at the lower income segment.

    I wanted to bring that to your attention because economists broadly give aggregates around excess savings, but if you think about it, it's really in the top quartile. That helps or doesn't help in terms of managing the debt. I think that's a really important factor to think about.

    Becky, do you want to add anything to that?

     I certainly can.

    Just for a point of clarification, the 428% is the lowest-income tier. That's their debt-to-income ratio. I think the number is over 200% if you remove the high-income earners.

    Having said that, I think it's important that when we look at our data, we absolutely do see that some consumers are more sensitive to different changes in the economy. For example, when there's a rise in the cost of living or inflation, we do see a disproportionate impact to lower-income consumers and maybe younger consumers as well. That is what we have seen in our data over the past few years. When we had those higher costs of living and high inflation rates, they were more impacted in terms of missed payments and in terms of credit usage. In particular, we saw a rise in credit card balances, for example.

     Can you speak a bit about the trend of the debt levels for consumers? Of course, you see it before we see the headlines. What's driving that? What does your forecast say for the next near to short term?

    Unfortunately, they didn't give me a crystal ball at Equifax. There are a lot of factors, which Becky can chime in on as well.

    There's a lack of confidence in this economy. There's a lack of confidence from consumers. If they have a job, they're worried about whether it will be replaced by AI. If they're in sectors like auto and aluminum and steel, or in parts of those supply chains, those folks are very much impacted with direct job losses, with shifts that have been cut or with the threat in the future. That's for businesses as well. Of course, we're a country of small and medium-sized enterprises. Those businesses are run by consumers. They also are worried about investing, spending and hiring in this period of uncertainty.

    There's a whole number of factors, I think, depending on the certainty we have going forward, in particular about our largest trading relationship. I think that will have a very big impact.

    Go ahead, Becky.

     I would absolutely agree. I think many factors, both nationally within Canada and internationally, can have a significant impact on consumers and the outlook for the rest of the year. As Sue mentioned, it really depends on what happens on that front as well and stability in the economy.

     Just to clarify, do the ratios we're seeing here include that invisible debt you talked about, the private lenders and the buy now pay later options?

    They do not. Some of the private lenders are starting to report, but the lion's share do not. It's the same with buy now pay later in this country. They're not obligated to do so the way they are in such jurisdictions as Australia and the U.K. That is a growing amount of outstanding debt. It might be for a $400 pair of jeans, but we've seen case studies in which a consumer may have 17 loans of $400.

     Thank you, Ms. Hutchison. We have to conclude that round.

    Mr. MacDonald, you have five minutes.

     Thank you, Chair, and thank you to the witnesses.

     I have the TransUnion report on my phone right here in front of me, so I'll ask a couple of questions on this data. It's been a long period of time since I looked at economic graphs and charts. The classroom is a long piece behind me.

     I do see the graph that deals with minimum payments continuing to increase on most products, but the rate of growth has slowed. When we look at this graph, you see the mortgage dropping the most in minimum payments. Can you speak to that? Is that an indication that the lower interest rates are starting to affect payments?

     Yes. When you think about the different types of products, some products, such as a mortgage or a line of credit, are very sensitive to interest rates. Others are more fixed rate, such as your credit card or, in some cases, loans. What we are seeing is that as interest rates came down...and we saw some of that with mortgages, obviously. The consumers were starting to get better rates, so the minimum payment required as a function of the size was affected. As well, I think home values generally have started to ebb a bit in a lot of markets. The size of homes being financed was also contributing to that.

     I think for other products there's a bit of deleveraging, but I think generally it's interest rate-related.

    When we look at your graph on delinquency, it kind of shows that most credit products have pretty well flatlined for a number of years. They haven't really increased or decreased, except for personal loans. Can you speak to that personal loan trend? What would that be in relation to?

     For that one, it's really a function of that market. Part of it is the reporting structure as well. We've seen a lot of newer and alternative lenders that play in that subprime or below-prime space. It's a function of both supply and demand. Consumers who are looking to get access to credit where they can't get it elsewhere are going to these lenders, but these lenders are also playing in that market, so they're pricing for that risk. It's not really a shock to that industry, but we are seeing that trend significantly higher.

     Maybe Ms. Hutchison would like to speak to that too, then.

    These are all aggregated numbers, which are very dangerous.

    Go ahead, Becky.

    I was going to say the same thing. Absolutely, I agree with what the TransUnion data is showing at the aggregate level. When you start to break that down into some of the subgroups of the population, you see variations. You see, in some cases, that missed payments are still rising. On the flip side of that, you see some consumers who are really resilient right now, and we're seeing their missed payments come down.

    It really is important to think about the divergence we are seeing. As you conduct your study, keep that in mind when you start to look at some of these aggregated numbers.

    You spoke earlier about consumers' choices and their reliance on more of these buy now pay later services, personal loans or even credit card debt.

    As MPs, what policies can we give direction to that will improve consumers' choices? You also spoke about the younger generation using some of these products more, as well as education. Could you elaborate on that?

    In particular for buy now pay later, these are often younger consumers, who don't have much, or any, credit history. To compel those firms to have them report to credit bureaus really helps those consumers in terms of financial inclusion. If they can get credit for those loans that are $400, $800 or whatever they're buying, that will help them build a credit history and help them come into mainstream financial services versus payday lending, buy now pay later, and this usurious cycle that lower-income Canadians often cannot get out of.

     Another thing I noted is that you got cut off when you were talking about the rent credit as part of being given a credit report on consumers. Is that getting close to being an acceptable way of evaluating credit?

     If you think about Canadians, they're renting. There has been 20% growth in rental in the last 10 years, according to StatsCan. Not as many Canadians are buying homes, because of affordability, in particular in the large cities. If you think about it, if someone pays $2,000 a month for 10 years to rent and someone else pays $2,000 a month for a mortgage, mortgages are included in terms of building your credit history, but rent is not. It's quite illogical.

    Yes, we're starting to gather, or we started a few years ago. We're starting to compile scores that lenders can use as an alternate with different data.

    I apologize, Ms. Hutchison, but that concludes the time.

    Mr. Garon, you have the floor for two and a half minutes.

    Thank you, Madam Chair.

    I'm going to ask a more open question to the Equifax and TransUnion representatives at the same time.

    A recent article in La Presse reported on a study by the Bank of Canada according to which the risk of a person defaulting on their mortgage could be identified in their credit file two years in advance. A report by the parent company of TransUnion, for instance, said that economic conditions were improving in the United Kingdom and Canada, but now there's the war in Iran, and interest rates could go up. As I said earlier, there has never been an oil crisis without an interest rate hike.

    Are you seeing any warning signs of an increase in mortgage default rates right now?

    I would also like to know, more generally, what you think of that analysis, which says that you have the necessary information to predict a change in mortgage default rates two years in advance.

    I'll give you the rest of my time to answer those questions.

    First of all, typically one of the drivers behind when we see missed payments on mortgages is heavily linked to the balance of those mortgages and the payment rates associated with that. As interest rates go up and down, we absolutely see missed payments move up and down at the same time, but there is a lag effect. Once the interest rate comes in, you have to wait for the renewal point potentially on that mortgage, and it can take 12 to 24 months to see the impact of a rising interest rate on missed payments and the flip side as it comes down.

    The numbers we see now in our data, where for some mortgages across Canada they did go up and then started to come back down again, are indicative of that reduced interest rate and that lag factor. What we have called out in a lot of our reports recently, though, is the fact that there are still provinces such as Ontario and British Columbia where that number is rising despite that. Now it is slowing down, but it is still being impacted by those payment shocks, particularly because of those high-balance mortgages.

    I don't know if Matt from TransUnion wants to add to that.

     Yes, I would echo that sentiment.

    I would say also that one of the things that are important to remember is the lag effect on consumers' ability to pay in terms of even delinquency, right? If you think about someone who is unemployed, they might have EI or continued payments that keep them going for a bit of time, so delinquencies also tend to be on a 12-month to 18-month lag.

    I apologize, Mr. Fabian. We're going to have to wrap it up there.

    Colleagues, we have about five minutes left in the meeting. Is it okay if I split the time equally between the Conservatives and the Liberals? Is that a yes? Okay.

    You have two and a half minutes, Mr. Hallan.

    Well, Madam Chair, in that case, I'd actually just like to move a motion that's been on notice.

    Madam Chair, I move this motion today as it is the last opportunity to do so before April 1, when the government will hike taxes on beer, wine and spirits. Since 2017, Canadians have had annual tax hikes on alcohol without a vote in Parliament, violating a fundamental tenet of the Westminster parliamentary system that goes back to the Magna Carta.

    What has made these tax hikes even worse for Canadians is the cost of living crisis that the government has created with its continuing massive deficits and borrowing debt, not to mention with hidden taxes like the industrial carbon tax and packaging taxes that drive up the costs of food, fuel and other essentials.

    Today, restaurants are closing by the thousands—7,000 of them alone just last year. Sharp increases in costs for food, supplies, wages and utilities and reduced customer spending have left restaurants hurting. We are hearing all across the country about the impact of these increases, so, once again, Conservatives are calling for a pause on this excise tax. We'd like to see a vote on that today, and I hope all parties can agree to that.

     Is there anyone else who...?

    Mr. Turnbull, go ahead.

    Well, I'm surprised that we're getting this, although I know the member put the motion on notice a while back. We had negotiated a schedule with a number of studies right until, I think, the House rises in June. It's a bit of a surprise here, but it's not really that surprising, because I know members opposite are able to move motions that are on notice.

    I'm certainly empathetic to the beer industry and the excise tax challenges that they've communicated to us, but I think today's meeting is not really the time to be doing this. It would have been nice if we'd had some notice from the opposition so that we could have discussed this and maybe found a way forward. I don't think there's any way we're going to get to a vote on this today. There's absolutely no chance, because I have issues with the wording of the motion. There are significant issues with the wording of the motion. There's highly charged partisan language in it, which I won't agree to and which I'm sure none of the members on our side will agree to.

    There's no contravention of the Westminster system in an excise escalator that's been passed in Parliament in the past and that is slated to increase on an ongoing basis or an annual basis. That's not a contravention of the Westminster system at all. There doesn't have to be a vote on every change to an excise tax that happens to be indexed to inflation.

    I think we could debate this some more today, but we're wasting valuable time with highly reputable expert witnesses, I would say, on a study that the Conservatives proposed. You're essentially wasting time that we could use to ask witnesses questions. You're actually taking away from my ability, because I was in the last round and was looking forward to questioning these wonderful individuals who gave up their time today in order to come here to lend us their expertise. I think household debt is a worthwhile topic for us to venture into. I was pleased that we could come to an agreement to actually study that.

    We only have a few minutes left in the meeting, but there's no way we're going to get to a vote on this today. That's for sure.

     Thank you, Mr. Turnbull.

     Mr. Garon.

    How much time is left?

    We're out of time.

    Will we be able to continue at another time?

     Seeing the time, do we have—

    No. We have a vote. We have a motion that's alive now. Either somebody would have to move to adjourn, and we'd have to agree to adjourn—

    Pardon me, Mr. Kelly. I didn't give you the floor.

     Just give me a moment. I'm going to consult with the clerk.

    I'm just going to briefly suspend for a moment. Thank you.

    Mr. Turnbull.

    Seeing the time, we've spent our two hours and I would move to adjourn today's meeting.

    Do we have consent to adjourn the meeting?

    An hon. member: No. Can we have a vote?

    The Chair: Then we have a vote.

    We will vote on the motion to adjourn. Do members vote to adjourn?

    Some hon. members: Agreed.

    The Chair: The meeting is adjourned.

    Thank you very much to our witnesses.

    I wish my colleagues some very productive weeks in their constituencies.

    Happy Easter and happy Passover.