TransUnion Q3 2020 Industry Insights Report

The latest Q3 2020 TransUnion Industry Insights Report found that Canadian consumers have adapted well to the ongoing economic crisis spurred by the pandemic, showing signs of resiliency. While consumer spending habits have yet to revert back to pre-pandemic levels, delinquency rates continue trending downward and some credit markets, such as mortgages, are seeing an influx of new activity and improved performance.

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

90+Day Consumer Delinquency Rate

“Over the summer we saw early signs that Canadian consumers were adapting to the new economic environment. While many Canadians remain cautious with their spending, there are signs of early recovery, particularly when noting an increase in the funding of major purchases such as homes and cars.”

- 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)

Several metrics point to Canadian credit-active consumers managing impacts of the pandemic relatively well. Average non-mortgage consumer debt in Q3 3020 fell 4.2% from the prior year to $29,376 as consumers were active in deleveraging and paying down credit obligations. This drop was led by credit card balances, which declined 11.6%. The decrease in credit card balances was partly due to lower spending and higher payment activity. Public health measures to contain the COVID-19 pandemic resulted in a series of business closures, which reduced consumers’ ability to spend. Further, many consumers deferred major purchases on credit cards with 48% of respondents delaying vacations, due to travel restrictions.

Auto loans and lines of credit balances also decreased by 2.9% and 4.3%, respectively. Conversely, personal loan and mortgage balances increased by 4.2% and 5.6%, respectively. Mortgages, in particular, experienced higher growth and demand largely due to higher housing prices and extremely low interest rates benefitting the refinance activity.

Matthew Fabian

“Canadians have leveraged government programs and lender support to offset cash flow concerns as both the government and lenders continued to support consumers through this economic shock. This has helped keep delinquency rates at low levels. Nevertheless, we do anticipate an increase in delinquency rates next year as deferral options expire and some consumers struggle to maintain payments due to financial impacts caused by a prolonged pandemic.”,

- Matthew Fabian, Director, Research and Industry Insights

Forcast

Government subsidies and payment holidays supporting low delinquency trends

Delinquency rates remain low as consumers continue to take advantage of payment holidays on outstanding balances. Approximately 3.1 million Canadians have taken advantage of payment deferrals since the onset of the pandemic, a proactive treatment strategy executed by lenders to support consumers through record-high unemployment and financial hardship.

Consumers have used the cashflow to pay down outstanding bills or debt and in some cases have continued to pay down balances against products on which they have taken a deferral. As a result, Canada’s overall non-mortgage consumer-level delinquency rate fell 48 basis points to 1.44% in Q3 2020 from the prior year.

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