TransUnion Canada reports that Gen Z and millennials' overall debt has grown $28 billion over two years

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      Not surprisingly, the economic contraction triggered by COVID-19 is making it more difficult for many Canadians to pay their debts.

      A new forecast issued by TransUnion Canada suggests that the delinquency rate for nonmortgage debt will peak at 6.9 percent by the end of the third quarter of 2020 before falling to 6 percent by early next year.

      Younger residents of Canada are facing the biggest financial challenges, according to TransUnion.

      For millennials rate of "serious delinquency"—i.e. having debts more than 90 days past their due date—rose to 7.9 percent in the first quarter of 2020 from 7.38 percent in the final quarter of 2019.

      Over the same period, Gen Z's serious-delinquency rate on nonmortgage debt rose from 6.2 percent to 7.5 percent.

      These two cohorts' overall debt has grown by $28 billion over the past two years.

      The overall nonmortgage delinquency rate was 5.61 percent at the end of last year.

      “Elevated unemployment and its effect on consumers’ income and ability to pay debt obligations is a primary driver of increased delinquency," Matt Fabian, director of financial services research and consulting at TransUnion, said in a news release. "The various government relief benefits, combined with deferral programs provided by lenders, can act to offset some of the COVID-related delinquency.

      "However, each of these measures may contribute to long-term risk at a future time, as consumers will generally still be responsible for paying these deferred obligations at some point in the future.”

      Across the country, the delinquency rate for credit cards is expected to reach 3.8 percent by the end of the third quarter, whereas the auto-loan delinquency rate is anticipated to reach 2.8 percent. The personal-loan delinquency rate is forecast to reach 5.1 percent.

      The fall in oil prices is expected to drive nonmortgage delinquencies to 8.3 percent in Alberta by the end of the third quarter.