23 May 2019

“The switch to non-revolving credit products is quite interesting, as it could mean more changes of consumer spending and confidence are ahead.”

Mortgage market keeps slowing down

In the fourth quarter of 2018, mortgage origination was down by 1.3% annually, restrained by the stress test and growing interest rates.

The lending and real estate market conditions depend on the area. For instance, British Columbia saw a 19.3% decrease in originations year-over-year, caused by additional provincial changes, aimed at cooling the market.

In case of cities comparison, mortgage originations fell by 1.3% in Toronto, while rose by 8% in Montreal.

In Q1 2019, mortgage balances were down annually by 4.2% in Q1 2019, and it concerned all risk levels, as subprime and near prime tiers were down by 6.4% and 6.9% respectively.

“It’s the third quarter in row with decreases in mortgage originations and balances. Many areas are adjusting to the new rules slowly, so it’s interesting whether we see drops when the market adjusts fully”, – noted Fabian.

The report also points to a more than 10% annual decrease in HELOCs.

In TransUnion’s opinion, the reason for that could be stricter lending rules, as the overall line of credit market expanded. The originations rose by 15.6% and line of credit accounts showed the highest average non-mortgage balances.

Delinquency rates remained almost unchanged

TransUnion says the delinquency rates in the sector of consumer credit products was relatively unchanged annually in the first quarter of this year.

In case of credit cards, the delinquency rates fell by 0.05% to 3.12%, line of credit saw a 0.02% decline, auto loans and mortgages were up by 0.02% each.

At the same time, installment loans reported a larger increase by 0.14% on a year-over-year basis, probably because of a hike in lending to riskier tiers seen recently.

“Canada’s consumer credit market is still strong and the delinquencies rates remain stable in spite of overall lending growth. Nevertheless, the national economy is slowing and keeps struggling with certain issues, which may start pressuring the consumers and affect the credit demand and their ability to manage debts. Lenders should remain cautious and continue to adjust their underwriting strategies to the new macro-economic conditions and consumer demand,” – added Fabian.