Rising Interest Rates and Tariff Talk Do Not Deter Strong Canadian Consumer Credit Performance at Midpoint of 2018

Newest TransUnion report shows continued declines in serious delinquency rates

At the midpoint of 2018, TransUnion’s (NYSE: TRU) latest Canada Industry Insights Report found that even as Canadian credit obligations continued to increase, serious delinquency rates have been dropping. These trends indicate a consumer credit market that is healthy and continuing to expand. At the same time, while the level of consumer debt continued to grow in Q2 2018, the TransUnion report found that it was doing so at a slower pace after several years of robust expansion.

The average non-mortgage debt level per consumer rose to $29,648 in Q2 2018, a 3.9% increase over the same period last year. This is the third consecutive quarter where the quarterly change is less than the change seen in the previous year, potentially signalling an inflection point. Delinquency rates remain in check, with the percentage of non-mortgage accounts 90 or more days past due (90+ DPD) decreasing 24 basis points from the prior year to 5.33% in Q2 2018. From a vintage perspective, the trends also remain relatively consistent as consumers taking on credit products in the most recent quarters show very similar delinquency patterns over time as consumers who opened credit products in previous years.

“We’re seeing some really interesting dynamics play out in Canada when it comes to consumer debt,” said Matt Fabian, director of financial services research and consulting for TransUnion Canada. “While consumer non-mortgage debt continues to rise, the rate of growth is slowing, and serious delinquency rates are down. This is happening even as some consumers may face pressures from increased costs due to tariffs. Also, interest rates continue to rise, which can often put strains on the consumer wallet. As a result, some consumers may be more cautious in adding to current debt levels as the cost of borrowing increases. However, prior TransUnion research has shown that the impact of rising rates may not be as great as some pundits might suggest. This, combined with growing net worth and low unemployment, point to continued strong Canadian credit performance.”

Credit cards, a key product in the consumer credit portfolio, continued to expand in 2018, both in terms of the number issued and balances. Card originations in Q1 2018 increased 5.6% over the prior year period. Originations are measured one quarter in arrears due to the reporting lag. Consumers are continuing to use their cards as well, with total card balances increasing 3.25% year-over-year to end the second quarter at $99 billion. Meanwhile, serious delinquency rates remain at controlled levels, with the percentage of cards 90+ DPD dropping three basis points year-over-year to 2.37% in Q2 2018. “Consumers continue to open new cards, use their cards, and perform well on their obligations, which are indications of a sound credit market,” continued Fabian.

Strong Canadian Credit Performance at the Midpoint of 2018


Average Balance

Annual% Change


Delinquency Rate*

AnnualBasis Point Change (bps)

Non-Mortgage Consumer Debt





Credit Cards





Installment Loans

$ 32,111




Auto Loans





Lines of Credit

$ 35,870




Mortgage Loans

$ 260,547




*Serious delinquency is defined as 60+ DPD for all credit products except for credit cards, where it is defined as 90+ DPD

TransUnion also found that the consumer credit score distribution had generally remained consistent over time, with some expansion in the Super Prime tier, i.e. the least risky credit consumers. This stability indicates that consumers are generally managing their credit well.

“We found that 91% of Canadian consumers either remained in their same respective risk tiers or improved during the second quarter of 2018. This is great news for consumers, as more people seeking loans may be eligible for better rates,” said Fabian.

More information about the Q2 2018 TransUnion Canada Industry Insights Report can be found here. Please visit the following website to register for TransUnion's Q2 2018 Industry Insights Report webinar, scheduled for September 20.

Midpoint 2018: Mortgage Lending Trends

Mortgage lending declines across Canada

Mortgage activity has slowed down across Canada in recent quarters. Overall, there was a 3.4% decrease in the number of new mortgages issued (mortgage originations) in Q1 2018 compared to Q1 2017; this follows an 8.8% year-over-year drop in Q4 2017. This trend suggests that the new mortgage rules may be impacting consumers who are either no longer qualifying, or are unable to get the amount of mortgage they want, or are simply waiting to see how the market reacts to the new rules.

Canadian seniors buck the trend with increased mortgage lending

The exception within the mortgage origination drop is within the older generation Canadians, including the Silent/Pre-War generation (aged 73-93) that saw a significant year-over-year increase (63%) in the volume of mortgages issued, as well as Baby Boomers (aged 54-72) with an 18% increase. It might be that these older generation Canadians are re-mortgaging or borrowing against the equity to support retirement or to financially support younger generation family members.

Biggest mortgage origination decline among Gen Z (aged 18-23) and Millennials (aged 24-38)

The biggest declines in mortgage originations were among the younger generations, with a year-over-year decline of more than 22% among Gen Z and 19% among Millennials.

Mortgage origination shifts by region

The largest slowdown in origination volumes were in Toronto, with a decline of 17.6% in Q1 2018 from the prior year, while Vancouver remained relatively flat with growth of 0.8% over the prior year. The largest mortgage origination growth was in Ottawa, with an increase of 8.4% over the prior year, followed by Montreal, with a 5.2% increase over the prior year.

New mortgage qualifying rules combined with rising rates potentially impacting risk distribution of originations

Originations in the super prime risk tier grew 4.4% year over year in the 1st quarter. However, all other risk tiers combined saw an average 8% drop in origination volumes. The declines have been most significant in the below-prime risk tiers. This suggests that the new qualifying rules combined with three successive quarterly increases in mortgage rates have contributed negatively to affordability, and may be affecting participation in the mortgage market – especially in the lower risk tiers.

Year-over-Year Percent Changes in Originations by Risk Tier

Risk Tier/Time Period

Q1 '16 – Q1 '17

Q1' 17 – Q1 '18

Super Prime



Prime Plus






Near Prime






Midpoint 2018: Non-Mortgage Debt Trends

Canadian average non-mortgage debt increased to $29,648, but may be reaching an inflection point

The average non-mortgage consumer debt for Canadians increased to $29,648 in Q2 2018, a 3.9% increase over the same period last year. However, the rate at which debt is rising continues to slow down. Non-mortgage consumer debt grew by only 1.6% from the previous quarter compared to a 2.2% quarterly increase in the same period last year and is the third consecutive quarter where the quarterly change was reduced year-over-year.

This potentially signals an inflection point. As interest rates rise and the cost of borrowing increases, Canadian consumers may have taken on as much debt as they are comfortable managing and are beginning to be more cautious in adding to their debt.

Consumer debt delinquency rates continue to decline

At the same time, there was a continued decline in defaults on consumer debt payments, with a 24 basis point drop in the consumer-level serious delinquency rate—the percentage of consumer 90+ DPD—to 5.33% in Q2 2018. This indicates that while there may be a slowing of consumer debt growth rates, consumers are still doing a good job of managing their current debt levels and are showing no immediate or widespread signs of being overextended.

Midpoint 2018: Credit Card Trends

Surge in credit card originations

Within the mix of consumer debt, there was a surge in the number of credit cards issued in Q1 2018, with an overall 5.6% increase year-over-year in credit card originations across all generations. This represents a dramatic shift compared to an approximate 10% decline year-over-year from Q1 2016 to Q1 2017.

Canada’s national credit card balance nears a milestone at $99 billion

The average credit card balance also increased, by 3.5% in Q2 2018, with the average consumer credit card balance now at $4,200. Canadian consumers continue to use their credit cards as a convenient payment vehicle – a trend that is likely to continue as more consumers shop online. The credit card market is nearing a milestone as it approaches $100 billion in balances.

Despite increased credit card use, delinquency rates decrease

Despite the increase in credit card debt, the good news is that credit card delinquency rates overall continue to decline. Q2 2018 saw a 3 basis point year-over-year decrease in the percentage of cards 90+ DPD, to 2.37% in Q2 2018.

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.

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