Spurred by improved economic conditions and the continued recovery
in oil prices, TransUnion’s (NYSE:TRU) latest Canada Industry
Insights Report found that oil producing regions such as Alberta
and Saskatchewan are beginning to experience improvement in their
respective consumer credit markets.
Improving credit performance in these provinces comes nearly
four years after the start of rapid oil price declines at the end
of 2014. Lower oil prices negatively impacted the local economies
heavily tied to the energy industry. In the summer of 2015,
TransUnion published a report that projected credit product
delinquencies in these regions to deteriorate at a faster rate than
the rest of the country as a result.
Delinquencies did, in fact, rise in both Alberta and
Saskatchewan. However, Q1 2018 may be a turning point. The first
significant annual decline was observed during the first quarter of
the year since 2015. TransUnion found that serious consumer
delinquency rates (90 or more days past due) dropped by 15 basis
points in Alberta and 39 basis points in Saskatchewan.
Signs of Recovery: Delinquency Rates
Declining in Oil Provinces
Consumer 90+ DayDelinquency Rates |
Canada |
Alberta |
Saskatchewan |
Q1 2018 |
5.43% |
6.50% |
6.54% |
Q1 2017 |
5.71% |
6.65% |
6.93% |
Q1 2016 |
5.70% |
6.39% |
6.53% |
Q1 2015 |
5.79% |
6.15% |
6.26% |
“We may be seeing the beginning of the consumer rebound in the
oil producing regions out west. Economic conditions have been
improving for a few quarters, as employment improves across the
country,” said Matt Fabian, director of research and analysis for
TransUnion Canada. “This is particularly good news for consumers in
Alberta and Saskatchewan, as they were most negatively impacted by
the oil crash from a few years ago.”
Oil prices reached $100 in Q1 2014 (WTI Crude price in U.S.
dollars, according to the U.S. Energy Information Administration)
before declining to $48 in Q1 2015 and even further to $35 in Q1
2016. However, oil prices are back on an upswing and reached
$63 as of Q1 2018. At the same time, unemployment levels in both
Alberta and Saskatchewan have improved over the last few years.
Alberta’s unemployment rate continued a strong downward trend to
6.3% in Q1 2018 from 7.9% in Q1 2017, while Saskatchewan dipped
slightly during that same timeframe – from 6.0% to 5.8% (Statistics
Canada, CANSIM, tables 282-0002 and 282-0022).
TransUnion also found that consumers in these regions also are
limiting their debt exposure. Average non-mortgage debt balance per
consumer in Alberta and Saskatchewan grew below the national
average in Q1 2018 from the previous year, at 1.9% and 2.5%
respectively. The national average rose 4.5% in that same timeframe
to $29,181. “In times of crisis, we often see debt balances on
products such as credit cards rise at greater rates, as consumers
use credit increasingly to make ends meet. It is therefore a
positive sign to see to see the use of credit in the oil provinces
actually grow more slowly than the country overall rate,” said
Fabian.
Debt Levels Rising, But Slowing in the
Oil Patch
Average Non-MortgageDebt Balances PerConsumer |
Canada |
Alberta |
Saskatchewan |
Q1 2018 |
$29,181 |
$37,075 |
$31,453 |
Q1 2017 |
$27,923 |
$36,358 |
$30,688 |
Q1 2016 |
$27,047 |
$35,824 |
$30,079 |
Q1 2015 |
$26,192 |
$35,261 |
$29,200 |
Q1 2014 |
$25,730 |
$35,340 |
$28,709 |
Mortgage Market Resetting
Despite new mortgage qualifying rules that came into effect in
January 2018, TransUnion observed a slowing in origination volumes
in Q4 2017. Originations are viewed one quarter in arrears to
account for reporting lag. Between Q4 2017 and Q4 2018, mortgage
origination volumes were down by 8.8%.
“We observed a slowdown in originations everywhere except in
British Columbia, while balances continued to grow nationwide,”
said Fabian. “This dynamic begs a few questions. Are consumers
taking a wait and see approach to the new qualifying rules that
came into effect? Are they pausing to measure the effect on home
prices? One might have thought that consumers would rush to
purchase homes before the new rules come into force to ensure they
qualified for the highest loan amounts, but they don’t appear to
have done that. TransUnion will be monitoring the mortgage market
closely in the coming quarters to assess the impact of the new
rules.”
The average new mortgage originated in Canada in Q4 2017 was
$284K, up 3.5% from the previous year.
TransUnion’s most recent report also found some interesting
mortgage origination trends from a life stage perspective.
Specifically, mortgage balances for the Pre-war/Silent generation
grew at 7.8%, while balances for mortgages issued to Millennials
fell 19.5%. “This dichotomy might suggest two very different
phenomena—the older generation may be leveraging the equity in
their homes for miscellaneous financing purposes, while Millennials
may find themselves unable to afford more expensive housing, and
hence are opting for lower-value homes,” added Fabian.
Serious mortgage delinquencies (60+ DPD) continue to remain low
and stable, with minimal volatility over the past two years.
Unit-level serious delinquency was 0.5%, a decrease of seven basis
points between Q1 2018 and Q1 2017. Balance-level mortgage
delinquency concluded Q1 2018 at 0.2%, which is five basis points
lower than the previous year. “With the recent increase in
interest rates, we will continue to observe these trends, but
generally do not expect a material impact on mortgages,” said
Fabian.
Steady Open to 2018
The first quarter of 2018 was highlighted by continued solid
performance by Canadians in most parts of the country. The number
of consumers with access to credit increased by 1.2% on an annual
basis to close Q1 2018 at 28.6 million. The 90+ DPD average
consumer delinquency rate also dropped on an annual basis by 28
basis points to 5.4% in the same timeframe. Accounts entering
collections status also declined by 21% to 0.7 million between Q1
2018 and Q1 2017.
The overall risk tier mix of Canadian consumers in TransUnion’s
national consumer credit database improved in Q1 2018, with 68% of
consumers considered Prime or better—a 2.2% increase over last
year. The Super Prime (i.e., lowest risk) segment grew the most
with a 76-basis point increase, while the proportion of subprime
(highest risk) consumers in Canada declined by 36 basis points from
last year.
“We continue to see strong consumer credit performance over the
past year, with apparently limited impact due to the rising
interest rate environment. This dynamic is something we will
continue to monitor,” concluded Fabian.
Q1 2018 Canadian Consumer Credit
Debt/Delinquency Picture
|
Average Balance |
Annual % Change |
Serious Delinquency
Rate* |
Annual Basis PointChange (bps) |
Credit Cards |
$3,970 |
+2.7% |
3.2% |
-5 |
Installment Loans |
$31,175 |
+10.7% |
4.1% |
+14 |
Auto Loans |
$20,786 |
+3.5% |
1.7% |
-12 |
Lines of Credit |
$35,764 |
+1.3% |
1.1% |
-11 |
Mortgage Loans |
$257,814 |
+4.9% |
0.5% |
-8 |
*Serious delinquency rates are 60 days or more past due
for all credit products except for credit cards (90+
DPD)
More information about the Q1 2018 TransUnion Canada Industry
Insights Report can be found here. Additional information
about a variety of credit products can be found by visiting our
website. Please visit the following website to
register for TransUnion's Q1 2018 Industry Insights Webinar
scheduled for June 14.
About the TransUnion Canada Industry Insights
ReportTransUnion’s Canada Industry Insights Report is an
in-depth, full population-based solution that provides statistical
information every quarter from TransUnion’s national consumer
credit database, aggregated across virtually every active credit
file on record. Each file contains hundreds of credit variables
that illustrate consumer credit usage and performance. By
leveraging the Industry Insights Report, institutions across a
variety of industries can analyze market dynamics over an entire
business cycle, helping to understand consumer behaviour over time
and across different geographic locations throughout Canada.
Businesses can access more details about and subscribe to the
Industry Insights Report at
http://www.transunioninsights.ca/IIR/.
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Contact
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TransUnion
E-mail
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