Mortgages show the highest credit growth, but delinquencies keep going down

The recent report by TransUnion shows that more than 390,000 new mortgage accounts were opened during the second quarter of 2021, marking an annual increase by 48.6% and a rise by 45% from to the second quarter of 2019.

Such results amount to $145 billion worth of new mortgage debt, which is 82% more than a year earlier.

“The sharp prices increases may keep the mortgage market growing moderately in the nearest future,” – TransUnion says.

According to its report, the average mortgage balance was up by 22% from a year ago and reached $379,567. Meanwhile, the latest data from Equifax says the number was up by 18% to $360,000.

The report also includes information on other credit products. For instance, new lines of credit went up by 86% on a year-over-year basis and almost by 6% compared to Q2 2019, while auto loans rose by 43% annually but fell by 7.5% from 2019 results.

The total number of new Canadians with credit was up by 1%, driven mostly by Gen Z consumers (born in or after 1995), reaching 3.4 million active consumers during the third quarter of this year. It’s 16% more than a year ago.

“Consumer credit activity is growing, as the economy keeps recovering and consumer confidence is improving,” – noted said Matt Fabian from TransUnion. “The economic recovery continues and lenders are loosening the stricter risk policies that were introduced during the pandemic. Such changes support growth in the supply of credit in order to meet the consumer demand.”

At the same time, even amid growing credit numbers, delinquencies in all credit categories kept going down in Q3.

Mortgage delinquencies were down by 0.05% to 0.13% on a year-over-year basis, while delinquencies in unsecured personal loans fell by 0.11% to 0.70%. Lines of credit showed a decline by 0.05% to 0.13% and auto loan delinquencies fell by 0.17% to 0.43%.

“High levels of consumer liquidity helped in reducing the delinquency rates, and government subsidies kept supporting consumers. As a result, they were able to avoid either going bankrupt or raising their levels of delinquency,” – TransUnion noted.

The pandemic led to an unexpected increase in the savings rate, with consumers paying off their loans. Combined with the government support programs, it helped reduce the delinquency rates. Nevertheless, as the economy keeps recovering and spending is growing, the situation may start to change.

 

 

 

 

 

 

 

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