TORONTO, June 01, 2021 (GLOBE NEWSWIRE) -- Today, TransUnion released the findings of its Q1 2021 TransUnion Industry Insights Report , which showed a sharp decline in balances across most products as higher consumer liquidity, reduced spending and lender accommodations enabled Canadian credit consumers to navigate the ongoing public health and economic crises. While the Canadian economy is improving, the credit market has been slow to recover as consumers are seeking fewer credit products and maintaining conservative borrowing behaviours. Nevertheless, the Canadian credit market shows signs of good health and consumer confidence is at its highest level in more than a year, according to TransUnion’s most recent Consumer Pulse survey , which suggests an improved outlook for new credit activity in the latter half of 2021 and beyond.
As the economy slowly recovers, we are witnessing consumers deleveraging in the Canadian credit market, with the exception of mortgages,” said Matt Fabian, director of financial services research and consulting at TransUnion. Despite increased consumer confidence and liquidity, the decline in consumer balances and originations could pose problems for lenders that are not prepared for the changing consumer behaviours, which could result in a higher proportion of risky balances. Lenders should consider actively seeking to replenish their portfolios with new balances and originations to maintain a manageable delinquency rate.”
Consumers show signs of deleveraging unsecured credit
In Q1 2021, use of credit remained slow across all products except for mortgages. Existing borrowers focused on paying down balances, while balance growth on newly originated products remained stagnant compared to prior periods. While the overall number of credit-active consumers remained essentially flat down by 0.47% year-over-year (YoY) consumers seem to be taking advantage of higher income and savings from enhanced government benefits and reduced spending to deleverage 1 .
The average non-mortgage consumer balance declined by 2.9% YoY to $28,900 in the first quarter of 2021. Unlike unsecured lending products, the average consumer mortgage balance increased by 5.7% to $112,000. This strong mortgage activity appears to have been buoyed by attractive interest rates and high real estate demand. Continued strong mortgage originations generated over $170 billion in mortgage balances in Q4 2020 a 43% increase from prior year. While delinquencies remain low, this recent growth bears watching in future quarters.
Consumer liquidity has increased as Canadian consumers have elevated their savings rate to an all-time high 28% of disposable income 2 . The decrease in non-mortgage balances could be attributed to this higher consumer liquidity, as well as appeared reduced spending and accommodation programs that have enabled consumers to pay down revolving balances on credit cards and lines of credit. In Q1 2021, the average revolving balance per consumer decreased by 7.3% YoY, with credit cards down by 16.5% YoY. The total number of accounts with one or more credit cards also decreased in Q1 2021 by 5.2%.
Originations slowed down across all credit products and risk tiers, except for mortgages
In Q4 2020, the Canadian credit market saw significant declines in origination volume YoY, suggesting that consumers have adequate liquidity and do not feel the need to engage in the credit market. New originations dropped across all products, except for mortgages, on an annual basis.
Bankcards experienced the sharpest decline in originations with a 31.4% reduction YoY. Other products suffered double-digit drops in originations, including personal loans (-27.1%), lines of credit (-18.3%), and auto finance (-8.8%).
Meanwhile, mortgage originations continued to grow in Q4 2020 increasing 25.8% YoY, likely fueled by record-low interest rates and increased demand for refinancing. Because of intense real estate activity, home prices surged by 31.6% in March on an annual basis, with home sales up 76.2%. This growth is expected to continue through the second quarter of 2021, before tapering off due to lower demand.
Origination Volumes
The decrease in originations occurred across the risk spectrum, though it was most pronounced in below-prime consumers 3 . Origination volumes for below-prime consumers fell 27% from the prior year, while prime and better originations were down by 12%.
According to TransUnion’s most recent Consumer Pulse survey , more than 30% of consumers who classified their credit as good to poor out of a potential range of excellent to poor considered applying for credit but ultimately did not. When asked about the reason for not applying, 29% reported they did not think they would meet income or employment conditions and 23% thought their credit history would be inadequate.
Higher-risk consumer originations were down across all product categories, signalling that lenders may not be expanding their risk appetite to pre-COVID levels or engaging these consumers. Subprime consumers saw a decline in originations across credit cards (-26.7%), auto loans (-33.6%), LOCs (16.9%), installment loans (-42.3%) and mortgages (-24.1%).
Lower-risk consumers also showed a decline in originations, with the percentage drop for new credit cards greater for super prime consumers than for subprime, likely due to lower demand. However, other unsecured products saw much smaller YoY declines for low-risk versus high-risk borrowers, whereas auto originations for prime and better borrowers effectively recovered to pre-pandemic levels.
We’ve observed depressed spending and decreased overall balances as people stay home, cut entertainment and travel costs and increase their savings rate,” explained Fabian. Fewer consumers have been seeking credit, regardless of whether they are below or above prime. As pandemic-related lockdowns ease and businesses reopen, consumers are expected to increase their spending, which may drive a resumed need to borrow. Lenders could work with existing consumers to inform them of the many credit products and services available as consumers return to more robust spending and borrowing patterns.”
Improving delinquency rates indicate resilience of the Canadian credit market
Despite the end of a majority of deferral programs, delinquency rates decreased for all products. At the end of Q1 2021, consumer-level serious delinquency (90 DPD) dropped 63 bps YoY to 1.4%, and consumer non-mortgage delinquency decreased YoY 62 bps to 1.39%, potentially driven by the combination of increased consumer liquidity and deleveraging observed driving down non-mortgage credit balances and reducing payments.
Consumers are managing financial obligations effectively, likely thanks to improved savings and debt relief, and many appear to have leveraged that increased liquidity to pay down credit balances. The number of consumers making payments beyond the minimum payment due on revolving balances grew 4% from the prior year.
There are several healthy market trends that lenders should consider in extending new credit to consumers,” said Fabian. As pandemic-related concerns begin to ease, consumers are performing better than expected even after deferral programs ended, and delinquencies are lower than expected. Lenders can take note of these positive trends and be prepared to meet the needs of consumers as their credit demand rebounds in 2021.”
1 U nless otherwise stated, the source of the information in this release is from the TransUnion Canada consumer database.
2 Statistics Canada. Table 36-10-0112-01 Current and capital accounts - Households, Canada, quarterly
3 TransUnion CreditVision ® score risk tier segment definitions: subprime = 300-639; near prime = 640-719; prime = 720-759; prime plus = 760-799; super prime = 800+
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.® TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people in more than 30 countries. Our customers in Canada comprise some of the nation’s largest banks and card issuers, and TransUnion is a major credit reporting, fraud, and analytics solutions provider across the finance, retail, telecommunications, utilities, government and insurance sectors.
For more information or to request an interview, contact:
View post:
Consumers Show Signs of Resilience and Deleveraging in a Slow Credit Market - Stockhouse
- MB Shuffle: X1N0 Places Self-Empowerment in the center of Superstar - More Branches - March 20th, 2024 [March 20th, 2024]
- Oops! I called my boss 'dude.' Career coaches weigh in on tricky ... - NPR - September 17th, 2023 [September 17th, 2023]
- Servant leadership and AI: Agility and empowerment for the CLO - Chief Learning Officer - September 17th, 2023 [September 17th, 2023]
- New Book You Were Born for More Offers a Transformative ... - Digital Journal - September 17th, 2023 [September 17th, 2023]
- New academic year, new faces on campus - Central Michigan University - September 17th, 2023 [September 17th, 2023]
- Vanilla perfumes: the 8 best and long-lasting - Marie Claire UK - September 17th, 2023 [September 17th, 2023]
- Now, CCTV cams must at coaching centres - Times of India - September 17th, 2023 [September 17th, 2023]
- What would have happened if Billie Jean King had lost to Bobby ... - The Boston Globe - September 17th, 2023 [September 17th, 2023]
- Discover the synergy between biotech and medtech in Ghent - Labiotech.eu - September 17th, 2023 [September 17th, 2023]
- Offtrack: The Long Road to Asylum for LGBTQ Refugees in Greece - Pulitzer Center on Crisis Reporting - September 17th, 2023 [September 17th, 2023]
- The rise of solo dates: Why Gen Zs are embracing 'Me Time' - Nairobi News - September 17th, 2023 [September 17th, 2023]
- Libra to Pisces: 4 Nurturing Zodiac Signs Who Prioritize the Needs ... - PINKVILLA - September 17th, 2023 [September 17th, 2023]
- 2023 Northwest Indiana Women's Leadership & Innovation Summit ... - Purdue University Northwest - September 17th, 2023 [September 17th, 2023]
- How Hinewehi Mohi uses te reo and music to bring Aotearoa together - New Zealand Herald - September 17th, 2023 [September 17th, 2023]
- The 20 Most Anticipated Sequel and Reboot Movies Coming in ... - MovieWeb - June 22nd, 2023 [June 22nd, 2023]
- What Taylor Swift teaches girls about taking control of their lives and ... - Morningstar - June 22nd, 2023 [June 22nd, 2023]
- Report Points To Growth Of Asian-American Businesses In ... - iHeart - June 22nd, 2023 [June 22nd, 2023]
- Empowering Women: A Day of Firearms and Firearm Safety | P ... - NewsBreak Original - June 22nd, 2023 [June 22nd, 2023]
- EMBRACING THE SPIRIT OF AFRICAPITALISM: CATALYSING ... - The Tony Elumelu Foundation - June 22nd, 2023 [June 22nd, 2023]
- The best albums of the year so far (2023) - The Vinyl Factory - June 22nd, 2023 [June 22nd, 2023]
- Benton County Sheriff's deputies train to help kids avoid bad situations - Westside Eagle Observer - May 14th, 2023 [May 14th, 2023]
- Too Much Seduction: How to stay pure in a culture that glorifies sex, lust, lewdness - EEW Magazine - May 14th, 2023 [May 14th, 2023]
- The House of Doors by Tan Twan Eng review tragedy in the tropics - The Guardian - May 14th, 2023 [May 14th, 2023]
- More Than Just A Game How Dungeons And Dragons Is Making ... - IFLScience - May 14th, 2023 [May 14th, 2023]
- GoodHeart | 25-y-o Leneka Rhoden is a beacon of service and ... - Jamaica Gleaner - May 14th, 2023 [May 14th, 2023]
- FemTech: technology empowering women's health and well-being - Lexology - May 14th, 2023 [May 14th, 2023]
- NBA Foundation: Uplifting Memphis youth through music - NBA.com - May 14th, 2023 [May 14th, 2023]
- Greek film 'Behind The Haystacks' to be featured at Sydney Film ... - Neos Kosmos - May 14th, 2023 [May 14th, 2023]
- Grants approved for groups in Wellington North exceed budget - Wellington Advertiser - May 14th, 2023 [May 14th, 2023]
- Self-Empowerment: 7 Ways to Empower Yourself | Maryville Online - March 4th, 2023 [March 4th, 2023]
- When you take all that we encompass and the drive that we have, it's ... - March 4th, 2023 [March 4th, 2023]
- Code of Ethics: English - National Association of Social Workers - October 25th, 2022 [October 25th, 2022]
- All children deserve arts and music programs in schools, thats why Prop. 28 should be approved - San Bernardino County Sun - October 13th, 2022 [October 13th, 2022]
- The Body Positive Sex Talk Empowering Women On TikTok - Women's Health - October 13th, 2022 [October 13th, 2022]
- TCL Announces Exciting Collaboration with TCL Brand Ambassador Shyla Heal to Elevate #TCLForHer Platform and Inspire Women to Redefine Greatness -... - October 13th, 2022 [October 13th, 2022]
- The good employer: Creating and living-out a culture of empathy, empowerment and understanding - Digital Journal - October 13th, 2022 [October 13th, 2022]
- International Day of The Girl: Rotary District 9125 Empowers 850 School Girls In Kano THE AUTHORITY NEWS - THE AUTHORITY NEWS - October 13th, 2022 [October 13th, 2022]
- MEET THE CANDIDATES: Charleswood-Westwood-Tuxedo - Winnipeg Sun - October 13th, 2022 [October 13th, 2022]
- Ruth Radelet (ex Chromatics) discusses the inspirations behind her debut solo EP - Brooklyn Vegan - October 13th, 2022 [October 13th, 2022]
- Here to stay! How this OG Tagaytay wellness spa survived the pandemic, is stronger than ever - Rappler - October 13th, 2022 [October 13th, 2022]
- Washtenaw County Board of Commissioners Set to Consider $3.2M in Awards to Local Organizations as Part of the Community Priority Fund -... - October 13th, 2022 [October 13th, 2022]
- FEMALE INCLUSION AND EMPOWERMENT CONFERENCE SPEAKERS - News - htafc.com - October 13th, 2022 [October 13th, 2022]
- Graphic designer works his way to the top - The Herald - October 13th, 2022 [October 13th, 2022]
- Foundation coaches in Tanzania attend in-person training sessions - Real Madrid - October 6th, 2022 [October 6th, 2022]
- Jade Helliwell releases first EP since 2018 in upbeat celebration of women - Music Talkers - October 6th, 2022 [October 6th, 2022]
- Competing interests: protection of transgender rights and freedom of religious beliefs - the Australian perspective - Kennedys - Kennedys Law - October 6th, 2022 [October 6th, 2022]
- Adam Levine and The Try Guys: Cheating scandals hit different right now - Vox.com - October 6th, 2022 [October 6th, 2022]
- Championing the value of time and a future-proof healthcare plan for women - Malaysiakini - October 6th, 2022 [October 6th, 2022]
- Seattle Rep Announces October Programming Featuring WHAT THE CONSTITUTION MEANS TO ME & More - Broadway World - October 6th, 2022 [October 6th, 2022]
- Who are the actors playing Martin Luther King and Malcolm X? - New York Daily News - September 29th, 2022 [September 29th, 2022]
- "One Of A Million" by Softcult - Northern Transmissions - September 29th, 2022 [September 29th, 2022]
- Aesthetic Gynaecology and Regenerative Medicine Training held in Delhi by IASRM (International Association of Stemcell and Regenerative Medicine) -... - September 29th, 2022 [September 29th, 2022]
- 6 Teens Who Make The World A Better Place - Forbes - September 29th, 2022 [September 29th, 2022]
- Earn Your Leisure Partners with Steve Harvey to Assemble an All-Star Financial Lineup for Innovative Festival at London's Historic Royal Albert Hall -... - September 29th, 2022 [September 29th, 2022]
- KNUST-Obuasi campus honours Dr. Love Konadu and 25 others - BusinessGhana - September 29th, 2022 [September 29th, 2022]
- Back-to-the-office moves leave tech uneasy - Axios - September 7th, 2022 [September 7th, 2022]
- FEMALE INCLUSION AND EMPOWERMENT CONFERENCE - News - htafc.com - September 7th, 2022 [September 7th, 2022]
- Neustar and LiveVox Join Forces to Improve Outbound Customer Contactability - Business Wire - September 7th, 2022 [September 7th, 2022]
- 5 Organisations We've Teamed Up With to Empower Africa's Young People - Global Citizen - September 7th, 2022 [September 7th, 2022]
- What is Witchcore? The Aesthetic Gaining Popularity on Social Media, Explained - The Mary Sue - September 7th, 2022 [September 7th, 2022]
- After 10 years of swiping right, what have we gained from Tinder? - Sydney Morning Herald - September 7th, 2022 [September 7th, 2022]
- Sisters of the revolution: the women of the Black Panther party - The Guardian - September 7th, 2022 [September 7th, 2022]
- ANALYSIS | Only SAs elite benefits from black economic empowerment and Covid-19 proved it - News24 - September 7th, 2022 [September 7th, 2022]
- 'We need to be aware of the power of touch' - Nursing Times - September 7th, 2022 [September 7th, 2022]
- Students reminded of University resources to support mental health and wellness - Pennsylvania State University - September 7th, 2022 [September 7th, 2022]
- Boudoir photographer Amanda Robb helps 'terrified' women love their bodies - Stuff - September 7th, 2022 [September 7th, 2022]
- Super Girl Surf Pro returning to Oceanside with global surf stars like Bethany Hamilton and a music festival - The San Diego Union-Tribune - September 7th, 2022 [September 7th, 2022]
- 5 Business Experts to Learn from in 2022 - The Australian Business Journal - September 7th, 2022 [September 7th, 2022]
- Stealthy state crimes during times of disaster - Mail and Guardian - September 7th, 2022 [September 7th, 2022]
- Neha Mujawdiyas Personal Journey In Accessing Basic Education Inspired Her Startup - SheThePeople - September 7th, 2022 [September 7th, 2022]
- The Experience of Pregnant Women in the Health Management Model of Int | IJWH - Dove Medical Press - September 7th, 2022 [September 7th, 2022]
- Men are more prone to suicide than women, reveals NCRB data - The New Indian Express - September 7th, 2022 [September 7th, 2022]
- 25 Empowerment Anthems: Songs for an Extra Boost of Confidence - Billboard - August 15th, 2022 [August 15th, 2022]
- 40 years later, business of healthcare changed in very personal ways PharmaLive - PharmaLive - August 15th, 2022 [August 15th, 2022]
- Setting boundaries in your daily life can protect you from 'harmful experiences': Here are 3 tips to get you started - CNBC - August 15th, 2022 [August 15th, 2022]
- I Tested PUMA's New Frida Kahlo Collection Honoring the Iconic's Legacy - mit - August 15th, 2022 [August 15th, 2022]
- The Activist Offering: Lessons from Kansas - Progressive.org - Progressive.org - August 15th, 2022 [August 15th, 2022]
- 'The Majnu Ka Tilla Diaries' Reveals Tibetan Empowerment in India - The Wire - August 15th, 2022 [August 15th, 2022]
- Kentwood Players announces open auditions for 9 TO 5 the Musical - Culver City Observer - August 15th, 2022 [August 15th, 2022]
- 'They/Them' Review: A Slasher That Isn't as Scary or Subversive as Real Life - CNET - August 15th, 2022 [August 15th, 2022]