Ontario Consumer Insolvencies Hit Highest Level Since The Financial Crisis

Canadian consumer insolvencies are rising fast, but nowhere are they rising quite like in Ontario. Office of the Superintendent of Bankruptcy Canada (OSB) filings rose in May. They’re rising so fast that Ontario just saw its second-highest number of May filings on record, only behind the 2009 Global Financial Crisis.

Source: OSB; Better Dwelling. 

Ontario consumer insolvencies are growing unusually fast these days. The OSB received 2,405 filings in the province for May, up 1.6% from last year. This marked the second-highest number of filings for the month on record, surpassed only by May 2009. Ontario consumers are facing Global Financial Crisis levels of stress, without a crisis? A little odd, but let’s not digress. 

This year marked the fifth straight year of annual growth, having last contracted in 2020. That can sound a little odd, but that was shortly after debt relief was implemented. Lenders gave consumers some breathing room to accommodate the slowdown. Credit stress in Ontario has been rising for a while now, and a global health crisis was the only recent break. 

Source: OSB; Better Dwelling. 

Not unlike Canadian home prices, erosion is heavily concentrated in Ontario. The province’s growth was 46% higher than the national average in May, and it represented 38.2% of all filings in Canada. The month marked the fifth straight year where its share has grown, advancing nearly 6 points. In other words, consumer insolvency filings grew 18.1% faster than average over five years. Ontario’s share in May was its largest since 2012 (ex-2020).  

The data is clear, but the credit industry’s reading is muddy. On one hand, Ontario’s consumer insolvencies are rising much faster than the rest of Canada. On the other hand, Ontario’s share of Canada’s population remains a little larger than its share of filings. Experts focused on velocity are growing increasingly concerned about faster quality erosion. Those focusing on absolute volumes think the province’s insolvency share being smaller than its population share is a good thing. 

Both tend to miss the real point. Ontario’s aggressive population growth was due to its outperformance. That helped the province attract top talent from Canada and beyond. Those inflows have since turned to outflows, with early core-aged workers leaving for provinces like Alberta. This issue seems to be slipping past policymakers, and may not be noticeable until it’s too late. Ontario’s share of rising credit stress may be below average, but this current move may just be a rest stop on the way to even worse levels.