TransUnion Q1 2021 Industry Insights Report

The Q1 2021 Industry Insights Report showed that, despite the Canadian economy improving, there was 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. Nevertheless, the Canadian credit market shows signs of good health and consumer confidence is at its highest level in more than a year, which suggests an improved outlook for new credit activity in the latter half of 2021 and beyond.

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90+Day Delinquency Rate YoY Changes for Non-Mortgage Loans

90+Day Consumer Delinquency Rate

“As the economy slowly recovers, we are witnessing consumers deleveraging in the Canadian credit market, with the exception of mortgages. Despite increased consumer confidence and liquidity, the sharp 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 actively seek to replenish their portfolios with new balances and originations to maintain a manageable delinquency rate.”

- Matthew Fabian, Director, Research and Industry Insights

Average Consumer Balance, by Product*

Forcast

*Represents the average balance held by a consumer across each type of product (consumers can have multiple instances of same product)

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 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%

Healthy market trends point to lending opportunity for new credit

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. Canadians are managing financial obligations effectively thanks to improved savings and debt relief, and many 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.

Matthew Fabian

“There are several healthy market trends that lenders should consider in extending new credit to consumers. 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.”

- Matthew Fabian, Director, Research and Industry Insights

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