TransUnion: Personal Debt Levels Experience First Quarterly Drop Since 2011; Largest Decline Since 2004

Toronto, June 4, 2013 – TransUnion’s quarterly analysis of Canadian credit trends found that the average consumer’s total debt (excluding mortgage) in Q1 2013 decreased 2% to $26,935, the first quarterly decline since Q3 2011 and the largest one observed since TransUnion began tracking the variable in 2004.

Despite the quarterly decline, total debt is still 3.48% higher than the $26,029 total observed in Q1 2012. The year-over-year increase, though, was lower than the previous two quarters (5.87% in Q4 2012 and 4.60% in Q3 2012).

“Consumer debt levels are typically softer in the first quarter of the year as many people pay off charges made during the holiday season,” said Thomas Higgins, TransUnion’s vice president of analytics and decision services. “This quarter’s drop is significant because it is the largest one we’ve observed since our tracking began in 2004, though it should be noted that they still remain near all-time high levels. It’s too soon to tell if we are in a deleveraging trend where balances start dropping consistently over consecutive quarters. A similar decrease in balances both on a quarterly and yearly basis occurred in 2011, but was soon followed by rapid balance increases in 2012.”

All provinces posted quarter-over-quarter decreases in consumer debt except British Columbia (3.69% v. Canada @ -2.14%), which once again regained its title as the largest debt per person province ($38,619) from Alberta ($36,223). The year-over-year increase in average debt was consistent throughout Canada, with all provinces experiencing increases from a low in Ontario of 1.98% to a high in Alberta of 8.08%. Large increases seen in Q4 2012 from Alberta (8.08% v. 11.20%), Quebec (3.55% v. 9.39%) and Prince Edward Islands (4.38% v. 9.04%) were more subdued in Q1 2013 with only British Columbia showing an increase (3.17% v. -0.09%).

Consumer Debt – Quarterly/Yearly

Total consumer debt increases were seen across all product categories.

• Canadian average credit card borrower debt (defined as the aggregate balance on all credit cards for an individual bankcard borrower) held steady year over year after dropping nearly $200 in the first quarter.
• Canadian lines of credit (LOC) borrower debt (defined as the aggregate balance on all LOC for an individual LOC borrower) increased 2.48% year over year holding its new trend from Q4 2012, with a slight decrease of -0.84% quarter over quarter.
• Canadian installment loan borrower debt (defined as the aggregate balance on all installment loans for an individual installment loan borrower) increased 5.90% year over year, its second consecutive strong quarter, and marginally 0.19% quarter over quarter.
• Canadian auto borrower debt (defined as the aggregate balance on all auto captive loans for an individual auto captive borrower) increased 5.27% year over year continuing its decelerating growth path.

“While balances remain high, we will continue to observe the impact of potential interest rate increases,” said Higgins. “The average Canadian pays approximately $1,398 in interest per year on their lines of credit. If the prime rate were to increase by 100 basis points, the yearly payments would rise by $350. An increase of 200 basis points would increase yearly payments by $699, placing more debt burdens on consumers.”*

Consumer Delinquencies – Quarterly/Yearly

Delinquency levels remained low for all credit products with lines of credit and auto captives continuing to have the lowest percentages.

“As we’ve noted in previous quarters, the automotive market has been doing exceptionally well with auto balances jumping the last few years while delinquencies continue to remain the lowest of all major credit products,” said Higgins. “Continued low delinquency levels in lines of credit is also a good sign for lenders and consumer alike. Lines of Credit make up 39.7% of all consumer loan balances, excluding mortgage, thus they provide consumers liquidity, and lenders a viable income stream.”

Three Highest Delinquency Provinces

Three Lowest Delinquency Provinces

*Based on Canadians who have a Line of Credit on their credit file. Interest rates were based on a Prime + 1% assumption, using the major banks currently posted Prime rate of 3%.

TransUnion’s Market Trends

TransUnion’s Market Trends is an in-depth, full sample solution that provides statistical information every quarter from TransUnion’s national consumer credit database, culled from anonymous credit files. Each Canadian consumer record contains hundreds of credit variables that illustrate consumer credit usage and performance. By leveraging Market Trends, customers from a variety of industries can analyze industry trends over an entire business cycle, helping to understand consumer behaviour in different geographic locations throughout Canada.