TransUnion Q2 2021 Credit Industry Insights Report

The Q2 2021 Industry Insights Report showed that the credit market has begun to rebound as the economy reopens. Positive momentum around key consumer credit trends and performance contributed to TransUnion Canada’s Credit Industry Indicator (CII) rising to 93.5 points, up nine points from the previous quarter and up 29 points from lowest point of the pandemic.

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

90+Day Consumer Delinquency Rate

Consistent with consumers paying down debt, delinquencies fell across all credit products throughout the pandemic. Overall consumer delinquency (90+ days past due for credit cards; 60+ days past due for all other products) was down by 0.63% YoY to 1.96% as of Q2 2021. Significant declines in delinquency seemed unlikely due to high levels of unemployment during the pandemic (14% last May and improving to 7.8% by end of Q2 2021), but consumers have benefited from higher levels of liquidity due to record savings, government subsidies, and lender deferrals.

“With the economy reopening and many Canadians returning to some normalcy, we expect to see overall consumption and demand ramp up. As consumer confidence soars and the pandemic recovery continues, lenders need to be prepared to meet the increase in credit demand.”

- 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)

While origination volumes have not yet returned to pre-pandemic levels, they have begun to increase as the economy reopens. Originations in Q1 2021 were up 34% over their level at the lowest point of the pandemic in Q2 2020.

Growth in new credit continues to be fueled by the mortgage market as the pandemic drove a housing market boom. With low interest rates, and consumers looking for larger or unshared living spaces, home sales increased in volume and average sale prices increased 38% YoY. Mortgage originations increased 37.5% YoY in Q1 2021, and new mortgage originations accounted for $96B of new mortgage debt in the quarter, up 59.5% from Q1 2020.

Future recovery likely, but dependent on COVID-19 factors

Over the next 12 months, Canada appears set to experience a vigorous economic rebound, supported by steadily growing productivity, rise in employment rates and ongoing low interest rates. However, despite the overall trend towards recovery, a full return to pre-pandemic credit activity will depend upon factors such as the vaccine rollout and the impact of the Delta variant of COVID-19. A renewed outbreak would likely cause setbacks in reopening and a corresponding slowdown in economic activity.

Matthew Fabian

“While pandemic-related threats to the economy do remain, as Canada continues to reopen, we expect consumers to increase their spending and for the recent acceleration in new credit growth to continue. Lenders should consider ramping up their acquisition strategies and channels accordingly. Market competition for acquisition and share of wallet will be high, as debt levels remain well below pre-pandemic levels. Accordingly, TransUnion Canada’s next annual Financial Services Summit, to be held on September 9-10 this year, will focus on enhanced strategies that lenders can leverage when prioritizing and preparing for future growth.”

- Matthew Fabian, Director, Research and Industry Insights

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