Equifax Canada Issues Warning On Increasing Use Of HELOCs

Equifax Canada is sounding the alarm on Canadians increasing use of Home Equity Lines of Credit (HELOCs).

The credit monitoring company’s latest consumer credit trends and insights report found that the number of new HELOCs taken out by Canadians jumped 56.7% in the second quarter of this year compared to the same period of 2020.

"The HELOC trend is worrisome as often the payments are tied to a variable interest rate," said Equifax Canada in a press release. If interest rates rise sooner than expected, many homeowners could find themselves in financial trouble, said the agency.

The Bank of Canada has indicated that interest rates could rise by the end of next year.

Along with HELOCs, Equifax Canada reported that new mortgage loans soared 60.2% year-over-year in the second quarter, led by homeowners in British Columbia. It’s the biggest jump ever recorded for a single quarter and was the main driver as total Canadian consumer debt hit $2.15 trillion between April and June, a 3% increase from the previous quarter.

Mortgages have been a main driver of rising household debt, with data from Statistics Canada showing that the total value of mortgages rose 1.2% in June to $1.73 trillion – the fastest increase since 2007.

Equifax found that 90-day delinquency rates fell in the second quarter for mortgage and non-mortgage loans, down by 32.6% and 28.6% respectively, thanks to government income support and increased disposable income.