Toronto,
22
August
2017
|
01:27 PM
America/Chicago

Housing Prices Drive Mortgage Debt Levels Higher; Delinquencies near Lows

TransUnion Industry Insights Report finds Canadian consumers performing well

Average mortgage loan balances rose nearly 5% in the last year to $198,781 at the mid-point of 2017, according to TransUnion’s (NYSE: TRU) latest Canada Industry Insights Report. Serious consumer delinquency rates (60 days or more past due) for mortgages dropped four basis points to 0.56%, marking the third consecutive quarter of declining delinquency.

“Home values continue to rise compared to the previous year, pushing overall mortgage debt levels up. However, we did observe an easing of this trend in the second quarter from the previous quarter,” said Matt Fabian, director of research and industry analysis for TransUnion Canada. “Despite increases in mortgage debt, serious delinquency rates remain low with very little volatility observed over the past two years. Consumers have so far been able to manage their mortgage obligations despite the increasing balance levels. We will continue to monitor these trends especially as interest rates rise, though we don’t anticipate a material impact on mortgages in the near term.”

The total number of active mortgage accounts grew annually to 6.0 million in Q2 2017, an increase of 1.2% from last year. New account balances for mortgages also are being driven higher – with an annual increase of 8% seen in Q1 2017 to $280,093. New account balances and originations are viewed one quarter in arrears to account for reporting lag.

Despite overall growth, TransUnion observed a 10.4% decline in origination volumes for Q1 2017 compared to Q1 2016. The decrease occurred across all risk tiers and ranged from a 12% drop for the prime segment to a 5% decline for super prime consumers. “Recent new regulations in Ontario appear to have had an impact on the volume of home sales and, consequently, mortgage demand,” added Fabian. “So while the number of mortgages is increasing, it is doing so at a slower rate than last year.”

Serious Delinquency Rates Down for 3rd Straight Quarter

In a sign that the consumer credit market continues to perform well in Q2 2017, TransUnion found serious delinquency rates declined on an annual basis for the third consecutive quarter. Overall, serious delinquency rates for non-mortgage debt dropped eight basis points (bps) to 2.65% in the second quarter. Serious delinquency is measured as 90 days past due (DPD) or worse for credit cards and 60+ DPD for other credit products. At the same time, average consumer non-mortgage debt grew by 2.7% to $22,154.

“With the macroeconomic backdrop of a growing economy, low unemployment and strong consumer confidence, we observed robust growth in installment and auto loans,” said Fabian. “At the same time, credit card volumes show signs of continued saturation and lines of credit remain relatively stagnant, albeit with potential opportunities for lenders in specific markets.”

As of Q2 2017, more than 27 million Canadian consumers had access to credit. Approximately 26 million consumers had access to revolving credit such as a credit card, while 8.8 million had a non-revolving loan such as a mortgage or auto loan.

Consumers with Access to a Credit Product in Q2 2017

Credit Products

Credit Cards

Installment Loans

Auto Loans

Lines of Credit

Mortgage Loans

# of Consumers

23.7 million

6.4 million

3.3 million

9.0 million

5.4 million

Annual % Change

-0.01%

+2.21%

+2.87%

-0.35%

+0.91%

While growth has been observed for most credit products, credit card demand continues to be weak, and slightly fewer consumers had access to a credit card this year. New credit card originations dropped 9.6% in Q1 2017 compared to the prior year quarter, to 1.29 million.

“The slowing pace of credit card acquisitions is a key contributor to the net decline in consumer access. This may be attributable to market saturation after years of growth and greater access to credit among consumers at all risk levels, at least in the prime credit risk ranges” said Fabian. “At the same time, the increase in aggregate credit card balances indicates that, despite the drop in card originations and access, consumers are continuing to use the cards they have. We have also seen lenders continue to increase limits to existing customers, which is helping consumers meet their demand for higher borrowing levels. In light of continued controlled levels of card delinquency, this strategy of increasing card credit limits appears to be effective.”

Q2 2017 Canadian Consumer Credit Debt/Delinquency Picture

 

Overall  Non-Mortgage Average Balance Per Consumer and Balances Per Accounts

Annual% Change

Consumer-Level Serious

Delinquency Rate*

AnnualBasis Point Change (bps)

Overall

$22,154

2.70%

2.65%

-8 bps

Credit Cards

$2,840

3.11%

3.11%

+5 bps

Installment Loans

$20,466

5.50%

4.00%

-22 bps

Auto Loans

$19,087

2.57%

1.80%

+9 bps

Lines of Credit

$36,342

0.74%

1.16%

-9 bps

Mortgage Loans

$198,781

4.78%

0.56%

- 4 bps

*Serious delinquency rates are 60+ days for all above credit products except for overall and credit cards (90+ days)

More information about the Q2 2017 TransUnion Canada Industry Insights Report can be found here. Among the details are more information about balance and delinquency trends for auto loans, installment loans, lines of credit and mortgage loans.

About the TransUnion Canada Industry Insights Report

TransUnion’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/.

About TransUnion (NYSE: TRU)Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion reaches consumers and businesses in more than 30 countries around the world on five continents. Based in Burlington, Ontario, TransUnion provides local service and support throughout Canada. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide. We call this Information for Good. Visit www.transunion.ca to learn more.