Canadian Consumer Credit Market Continues to Grow, Driven by Expansion of Non-Revolving Credit Access and Balances

The newly released Q1 2019 TransUnion (NYSE: TRU) Industry Insights Report shows that there was continued positive growth in the Canadian credit market in the first quarter of the year. Growth was driven by a rise in the total number of Canadian consumers with access to credit, as well as an increase in the amount they are borrowing. Importantly, delinquency rates remained broadly flat compared to a year ago.

The total number of consumers with access to credit grew 1.3% year-on-year (YoY) to 28.9 million. Overall consumer balances increased at an even faster pace, up 4.2% over the same period, with total balances reaching $1.85 trillion in Q1 2019.

The number of consumers with non-revolving credit products, including auto and installment loans, accounted for the majority of this growth. The total number of consumers holding one or more of these products increased by 3.1% overall YoY in Q1 2019. At the same time, the average balance per consumer saw an even greater increase, at 7.2%. Conversely, revolving accounts—credit cards and lines of credit—showed less movement. The total number of consumers with these types of accounts increased by just 1.5% over the same period, and the average balance per consumer was largely unchanged, down 0.3%.

“The Canadian consumer credit market expanded against a backdrop of moderating economic growth, signs of increasing inflationary pressures and higher interest rates. It’s a big positive that this credit growth hasn’t come at the expense of serious delinquencies, which remained broadly flat,” said Matt Fabian, director of financial services research and consulting for TransUnion Canada. “The shift in focus towards non-revolving credit products is an interesting development and may be indicative of wider changes in consumer spending behavior and confidence.”

The TransUnion report also revealed that lenders were extending credit across multiple risk tiers, including consumers in higher-risk categories. Balances increased across all tiers YoY in Q1 2019, but grew most quickly in percentage terms among consumers in below-prime risk tiers, defined as those with TransUnion CreditVision risk scores below 720*.

Encouragingly, overall serious delinquency rates (percentage of consumers with at least one delinquent credit product) remained steady at 5.36% in Q1 2019, a 5 basis point drop from the prior year. However, this headline figure belies variations in regional performance, with some regions seeing improved YoY delinquency perfomance and others experiencing increasing delinquencies.

Q1 2019 Metrics for Major Credit Products

Credit Product

Q4 2018 Originations(1) – All Borrowers

Annual Change

Average Balance Per Consumer – All Borrowers

Annual Change

Consumer-Level Serious Delinquency Rates(2)

Annual Change

Consumer Credit Cards






- 5 bps

Captive Auto Loans






+ 2 bps

Lines of Credit






- 2 bps

Installment Loans






+ 14 bps







- 2 bps

(1) Originations are viewed one quarter in arrears to account for reporting lag.

(2) Serious delinquency rates are 90 or more days past due for credit cards and 60 or more days past due for all other credit products.

Revolving balances expand, particularly among higher-risk borrowers

The report’s findings revealed that total account balances increased across all major product types in Q1 2019. At the same time, when looking at balances for revolving credit products like credit cards, consumers in below-prime risk tiers had slightly higher growth rates than the market overall. For revolving accounts, overall balances grew 5.0% YoY in Q1 2019, but among higher risk tiers this growth was even more pronounced, at 6.0% and 5.9% for subprime and near prime, respectively.

This higher balance growth among below-prime consumers may indicate an increased willingness in lenders to grant credit within this segment. While the economy continues to grow, the pace has slowed in recent quarters, and this slowdown may be impacting segments of the consumer market. Consumers seeking liquidity for durables purchases and day-to-day spending needs may be turning increasingly to credit cards and lines of credit to fund their purchases.

“If the economy continues to cool and consumers’ disposable income is stretched, we would expect to see higher revolving balances in below-prime segments, as these are the consumers who are more likely to use products like credit cards to start to cover day-to-day living expenses. It is a trend that warrants further scrutiny in upcoming quarters and will provide good insight into both lenders’ continued appetite for risk as well how household budgets are coping with changing economic conditions,” continued Fabian.

A shift in line of credit lending

The latest quarter saw a significant increase in originations of new line of credit (LOC) accounts—the product with the highest average non-mortgage balances—with originations up 15.6% YoY. This increase was led predominantly by those in the prime plus and super prime segments (CreditVision risk scores of 760 and above), which together recorded a 20% increase.

The resurgence of originations in this category, after eight quarters of low growth, was driven by an increase in unsecured line of credit products in the market – these accounts saw 20% YoY growth in the current quarter. In contrast, home equity line of credit (HELOC) accounts, which had seen growth in prior quarters, recorded a YoY decline of over 10% in Q1 2019. This drop in originations for the HELOC product, which is secured by the borrower’s home, may be due to new mortgage qualifying rules that have dampened lender demand for issuing this product type and shifted the supply of new revolving accounts to the unsecured LOC product.

Lines of credit are typically cross-sell products offered by major banks to existing customers, and tend to carry lower overall delinquency risk as they are often advanced to lower-risk consumers. Given the potential for increased margins driven by increasing interest rates, we may see banks become more aggressive in marketing in this space. Additionally, as the mortgage market potentially tightens due to new rules, consumers may be using lines of credit to renovate and upgrade existing homes instead of moving to a new home. It is important to understand that LOCs have variable rates, which means borrowing costs have been rising with the recent increases in the Bank of Canada policy interest rate. It will be important to monitor this dynamic and observe how consumers and lenders respond if interest rates continue to increase.

Mortgage market continues to adjust to changing requirements

As observed in previous quarterly reports, the mortgage market has continued to slow as a result of mortgage stress testing requirements that have increased eligibility criteria and potentially reduced the amount of loans consumers may qualify for. In turn, this has likely impacted lender supply. Rising interest rates have also impacted affordability. As a result, new mortgage originations in Q4 2018 (latest available originations data) declined 1.3% YoY. However, this decline wasn’t uniform across provinces, with British Columbia seeing the largest decline at 19.3% YoY – in part a result of additional provincial regulations aimed at cooling the market. Markets in major cities like Toronto (-1.7%) have also seen declines as a result of affordability and qualifying rules, while certain other markets like Montreal (+8.0%) remain relatively vibrant.

In comparison to overall mortgage originations, mortgage balances had a more pronounced fall, with a YoY decline of 4.2% in Q1 2019. The decline spanned all risk tiers, with subprime and near prime tiers falling the most at 6.4% and 6.9%, respectively.

“This is now the third consecutive quarter we have seen a decline in both mortgage originations and balances. Adjustment to the new stress test regulations has been slow in many areas, and it will be interesting to see if any residual year-on-year declines remain after market demand fully adjusts to these new conditions,” said Fabian.

A mixed picture for delinquency rates

Delinquency rates remained relatively stable across products, with only small variations in major products except installment loans. This positive performance was observed despite slowing economic activity across Canada, with GDP growth expected to slow to 1.1% in 2019 after growth of 1.8% in 2018 (source: Oxford Economics). Larger changes were seen across provinces, perhaps better reflecting the mixed fortunes of consumers across the Canadian economy.

For credit cards, the most commonly held product amongst Canadian consumers, consumer-level serious delinquency rates dropped only slightly, down 5 basis points (bps) to 3.12%. Similarly, small changes were seen in delinquencies for line of credit accounts (down 2 bps), auto loans (up 2 bps) and mortgages (also up 2 bps). A more significant change was seen in installment loans, up 14 bps YoY, which is perhaps reflective of the increase in lending to riskier tiers in this category observed in recent quarters.

Oil producing provinces such as Newfoundland and Labrador, and Saskatchewan recorded the largest increases in consumer delinquency rates for non-mortgage products – up 30 bps and 19 bps, respectively YoY in Q1 2019. Conversely, Ontario recorded a 16 bps drop over the same period.

New Brunswick, despite recording a 10 bps fall in non-mortgage consumer delinquency rates, still has the highest overall levels of non-mortgage delinquency (8.26%). This higher delinquency level is likely due to shifting demographics and an aging population combined with some regional economic slowdown through 2018, which impacts consumer disposable income and ability to meet loan repayments.

“The Canadian consumer credit market remains robust with delinquencies rates staying broadly stable despite a growth in overall lending levels. However, the economy is slowing and continues to face some headwinds, which could eventually create some pressure on segments of consumers that could impact credit demand and their ability to service their debt obligations. As we progress through this business cycle, lenders will need to remain vigilant and continue to adjust their underwriting strategies and portfolio management strategies to accommodate changing macro-economic conditions and consumer demand,” concluded Fabian.

More information about the TransUnion Canada Industry Insights Report, including details about a variety of credit products, can be found here. Among the details are more information about balance and delinquency trends, including for auto loans, installment loans, lines of credit and mortgage loans. Please visit the following website to register for TransUnion's Q1 2019 Industry Insights Report webinar scheduled for May. 23 at 2 p.m. ET.

* TransUnion CreditVision score risk tier segment definitions: subprime = 300-639; near prime = 640-719; prime = 720-759; prime plus = 760-799; super prime = 800+

About the TransUnion Canada Industry Insights Report

TransUnion’s Canada Industry Insights Report is an in-depth, full credit-active 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.

About TransUnion (NYSE: TRU)

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