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TRANSUNION Q1 2022 CREDIT INDUSTRY INSIGHTS REPORT

The Q1 2022 Credit Industry Insights Report (CIIR) showed a surge in credit activity as the economy strengthened. As part of the CIIR, TransUnion maps the consumer credit market health with its Credit Industry Indicator (CII), which rose 22 points year-on-year (YoY) to 105.3 in March 2022, returning to pre-pandemic levels. This rise was driven by improvements across all consumer credit health categories measured by the CII – demand, supply, consumer behaviour and performance – and marks the first time since the pre-pandemic period that all four factors grew in tandem.

 

 

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

Q4 2022 Industry Insights Report Image

Consumer delinquencies remain low in year-over-year comparisons and are still below pre-pandemic levels. While overall consumer delinquencies are not a major concern, some credit products experienced higher deterioration in the recent quarter. Personal loan consumer delinquency1 increased 19 bps YoY, rising for the third consecutive quarter.
 


”As the pandemic impacts continue to fade and Canada’s economic recovery endures, the Canadian credit market has experienced significant growth in credit activity. Credit participation is increasing as lenders employ more aggressive growth strategies, and as credit demand increases, balances are growing as well. However, while the economy continues to recover, rising inflation and interest rates pose some uncertainty and volatility in the market.”

- Matthew Fabian, Director, Research and Industry Insights

Average Consumer Balance, by Product*

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

The Canadian economy continued to rebound, with the unemployment rate falling to 5.3% in March 2022, marking a robust recovery for the labor market from the impacts of the pandemic. Against this backdrop, credit activity grew in Q1, with lenders increasing acquisition efforts and consumers returning to pre-pandemic credit use. Credit participation2 increased 2.1% YoY in Q1 2022 bringing the credit active population to 29.7M consumers, with the increase partly driven by increased originations by lenders. Origination volumes increased 12% in Q1 2022, with lines of credit and credit card new openings driving volume, up 47.5% and 24.6% YoY, respectively.

As consumer demand for credit grew, total credit balances increased 9.2% YoY when compared to Q1 2021, and were up 13.8% when compared to Q1 2020. This growth was driven partly by the resurgence in average credit card balances per consumer, up 4.6% YoY in Q1 2022. This was the first time that YoY growth in average card balances was observed since the onset of the pandemic and represents a sign of recovery in consumer spend behaviours. Average personal loan balances per consumer also increased significantly, up 19.1% YoY. In addition, limited inventory is driving up prices for homes and vehicles, which is in turn pushing average consumer balances higher for both auto and mortgage products, up 3.3% and 8.4% respectively.

With rising inflation and interest rates, Canadians are concerned aboutfuture household finances

 

Inflation and interest rate hikes are moderating an otherwise recovering economy. Canada’s consumer price index rate rose to 6.7% in March, marking a 30-year high, and the Bank of Canada raised its interest rate by 0.5% to 1%. Increased interest rates, combined with already slowing demand for mortgage refinancing, tempered mortgage origination growth from the record highs observed over the previous two years.

A combination of rising interest rates and a higher cost of living can create a sudden change in payment obligations that a consumer cannot control, also known as a payment shock. Consumers have a rising level of concern about these dynamics, with inflation remaining a top worry of Canadians in TransUnion’s Q1 2022 Consumer Pulse Study. More than half (56%) of Canadian consumers reported being very concerned about the inflation rate and associated impacts, and 56% indicated that these concerns have impacted their purchasing behaviour. In addition, while most consumers felt positive about their current financial situation, 54% of Canadians indicated they do not feel as optimistic about their household finances over the next 12 months. Nearly half (46%) indicated they are cutting back on discretionary spending, and one in four (25%) reported that they do not expect to be able to pay at least one of their current bills and/or loans in full.


"Canadian consumers have shown great resiliency in the past two years, with increased savings aided by government and lender assistance programs. The credit market didn’t experience significant destabilization during the pandemic, and now it is normalizing to pre-pandemic levels of activity, especially in the credit card space. While we’re seeing increased credit activity alongside many positive macroeconomic trends, skyrocketing inflation is a concern, and higher interest rates make the cost of servicing debt more expensive, highlighting the need for more frequent monitoring and prudent lending."

 - Matthew Fabian, Director, Research and Industry Insights


1 The proportion of consumers 60 or more days past due on at least one installment loan in wallet
2 The number of consumers utilizing credit

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