Against a macroeconomic backdrop of persistently elevated inflation
and high interest rates, TransUnion data indicates more Canadians
are engaging in the credit marketplace, leading to a steady growth
in credit participation. The number of consumers holding at least
one active credit product grew by 3.6% year-over-year (YoY) in the
fourth quarter of 2023 to an unprecedented 31.5 million, with
approximately 96% of Canada’s credit-eligible population –
consumers aged 18 and older – having access to at least one
traditional credit product. At the same time, New-to-Credit
Canadians represented $1 billion growth in balances over the past
year.
The volume of credit originations by
‘New-to-Canada’1 consumers grew 46% YoY from 2022 to 2023 and were
responsible for 12% of total originations (up from 5% in 2021).
This newly credit active population, including nearly 470,000
immigrants2 over the last year, accounted for $3.5 billion in new
outstanding balances.
“As the New-to-Canada population continues to
grow, banks should continue to focus on engaging these consumers
and addressing their specific credit needs not only at acquisition,
but throughout their lifecycle,” said Matthew Fabian, director of
financial services research and consulting at TransUnion Canada.
“This segment represents a significant opportunity to build longer
and deeper relationships as these new consumer’s credit wallets are
likely to expand as they make Canada their new home.”
Along with an increase in total credit
participation, the number of consumers carrying a balance also
increased by 3.7% YoY and reached 29.1 million, constituting
approximately 92% of credit active consumers in Canada. As a
result, the total outstanding balances across all credit products
reached a new record of $2.4 trillion, reflecting a 2.9% YoY
increase as of Q4 2023.
These findings are featured in information and
insights company TransUnion’s (NYSE:TRU) quarterly Credit Industry
Insights Report (CIIR) and are supported by the company’s Q4
Consumer Pulse Survey.
As part of the CIIR, TransUnion maps consumer
credit market health with its Credit Industry Indicator (CII). The
CII is a country-specific measure of consumer credit health trends,
focusing on four pillars: demand, supply, consumer behaviour and
performance. The CII for Q4 2023 in Canada was 106.5 in December
2023, up 1.5 points compared to the same period in 2022. This
growth was primarily led by the rising consumer credit
participation as balances and the number of consumers in the credit
market have continued to grow at a healthy pace.
Lenders Scaled Back due to Concerns
Around Rising DelinquenciesCanadians’ average credit
balance has trended up, given the underlying macroeconomic
environment pressures and consumers’ increased reliance on credit,
resulting in increasing minimum payment obligations for
consumers.
Table 1: Average Minimum Monthly Payment Due* |
|
Q4 2022 |
Q4 2023 |
% YoY |
Credit Card |
$102 |
$114 |
11% |
Auto Loan |
$625 |
$662 |
6% |
Installment Loan |
$70 |
$79 |
13% |
Line of Credit |
$411 |
$466 |
13% |
Mortgage |
$1,969 |
$2,203 |
12% |
*Average for all consumers holding one or more
account of that product type.Source: TransUnion Canada consumer
credit database
“Rising minimum payment obligations have
pressured consumers, although historic strength in the job market
and positive real wage growth have helped consumers address this
challenge,” said Fabian. “As pressures from inflation and high
interest rates continue to persist, more Canadian consumers may
find that their disposable income does not keep up with rising
payments, and will need to make trade-off decisions between
spending and paying down bills and credit debt.”
While Canada’s credit market has demonstrated
overall resilience, some consumer segments are facing the
combination of a high cost of living, sustained high interest
rates, and complex housing dynamics, making them more vulnerable to
delinquency.
Overall consumer-level serious delinquency (the
proportion of consumers with a delinquency 90 or more days past
due) increased 15 bps YoY to 1.66% during the fourth quarter of
2023, which marks the third consecutive quarter of rising default
rates. Higher delinquencies were observed across all major consumer
credit products.
Table 2: Consumer-level serious delinquency (all
products) |
Product |
Q4 2022 Consumer-level serious delinquency* |
Q4 2023 Consumer-level serious delinquency* |
Change (bps YoY) |
Credit Cards |
0.75% |
0.84% |
+8 |
Auto Finance |
0.83% |
0.92% |
+9 |
Personal Loans |
2.27% |
2.48% |
+21 |
Lines of Credit |
0.26% |
0.37% |
+11 |
Home Finance |
0.19% |
0.22% |
+3 |
Total Consumer (90DPD) |
1.51% |
1.66% |
+15 |
* Serious delinquency measured as 60+ days past
due for all products except credit card which is 90+ days past
dueSource: TransUnion Canada consumer credit database
“These delinquency levels are still healthy when
compared to pre-pandemic delinquency rates. As credit participation
increases to include more New-to-Credit and New-to-Canada
borrowers, we expect to see a subsequent uptick in delinquency
rates, which is reflective of an active credit market in Canada,”
said Fabian.
Another trend observed during the fourth quarter
of 2023 was an 8% YoY rise in first-time defaulters – those who
defaulted on at least one credit account for the first time in
their credit history. First time defaulters comprised over 20% of
all consumers in early-stage delinquency.
“These trends pose a unique challenge for
lenders as these are consumers with no recent missed payments,”
explained Fabian. “As these defaults occur for the first time,
lenders must focus on devising proactive risk strategies to predict
first-time-default customers before they first miss payments, and
help to educate consumers and enable responsible credit
practices.”
Likely in response to these recent increases in
delinquency, lenders have tightened underwriting standards in
recent months, as they manage existing portfolio health carefully
with slower loan growth. Despite overall inquiries having increased
by 22% YoY, most credit products, except for credit cards and auto
loans, experienced a YoY decline in origination volumes (a measure
of both consumer demand and lender willingness to advance
credit).
Credit Product |
Q3 2023 Year-over-year Origination Volume
Change |
Credit Cards |
+14.1% |
Auto Loans |
+3.1% |
Lines of credit |
-15.1% |
Unsecured personal loan |
-2.5% |
Mortgage |
-3.0% |
Source: TransUnion Canada consumer credit
database
For more information about the Q4 2023 Credit
Industry Insights Report, please click here.
*According to TransUnion CreditVision® risk
score: Subprime = 300-639; Near prime = 640-719; Prime = 720-759;
Prime plus = 760-799; Super prime = 800+
About TransUnion (NYSE:
TRU)
TransUnion is a global information and insights
company with over 13,000 associates operating in more than 30
countries, including Canada where we’re the credit bureau of choice
for most of Canada’s largest banks. We make trust possible by
ensuring each person is reliably represented in the marketplace. We
do this by providing an actionable view of consumers, stewarded
with care.
Through our acquisitions and technology
investments we have developed innovative solutions that extend
beyond our strong foundation in core credit into areas such as
marketing, fraud, risk and advanced analytics. As a result,
consumers and businesses can transact with confidence and achieve
great things. We call this Information for Good® — and it leads to
economic opportunity, great experiences and personal empowerment
for millions of people around the world.
For more information visit:
www.transunion.ca
For more information or to request an
interview, contact:
Contact: Alex
WilcoxE-mail: Alex.Wilcox@ketchum.com
Telephone: +1 705-878-6815
____________________1 ‘New-to-Canada’ consumers
are those relocating into the country and entering its credit
market for the first time.2 Immigrants in Canada 2023 |
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