SOURCE: TransUnion

TransUnion

December 19, 2013 06:00 ET

TransUnion: Canadian Debt Levels to Rise At Faster Rate in 2014, Though Delinquency Levels to Drop

TORONTO, ON--(Marketwired - Dec 19, 2013) - TransUnion's first annual forecast for Canadian consumer credit calls for a significant increase in debt while delinquency levels decline in 2014. The average consumer's total debt (excluding mortgage) is expected to rise by more than $1,000 from an estimated $27,743 in Q4 2013 to an all-time high of $28,853 at the end of 2014.

"The average Canadian consumer's total debt is expected to rise by four percent in 2014, which would be more than $4,500 higher than what we had observed five years earlier in 2009," said Thomas Higgins, TransUnion's vice president of analytics and decision services. "While the 2014 increase is much greater than the expected one percent rise in 2013, it is in line with consumer debt growth of recent years."

 
AVERAGE CONSUMER TOTAL DEBT (EXCLUDING MORTGAGE) AND YEARLY PERCENT INCREASES OBSERVED/EXPECTED
Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014
$22,347 $24,346 $25,709 $25,960 $27,485 $27,743 $28,853
13.8% 9.0% 5.6% 1.0% 5.9% 0.9% 4.0%
             

"In recent years, the increase in auto sales has helped propel the total debt number and we believe auto captive loans will once again be a driver of this increase in 2014," said Higgins. "Installment loans also have played a major role and we don't expect there to be a material change in this trend."

The impact of auto captive loans and installment loans on average total debt can be seen in balance movements since 2012. While average consumer debt has increased 5% between Q1 2012 and Q3 2013 (latest data available), auto captive debt and installment loans have seen the biggest increases of 9% and 10%, respectively. "It's particularly important to note when you take into account that lines of credit, by far the most used credit product by Canadians, has remained flat during that same period," added Higgins.

While credit balances rise, the national consumer credit delinquency rate (the ratio of borrowers 90 or more days past due on all credit products) is expected to drop from 1.76% at the end of 2013 to 1.66% at the conclusion of 2014. The delinquency rate includes key consumer lending products such as auto loans, credit cards, installment loans, lines of credit and student loans.

The delinquency level for all major lending products is expected to end 2014 nearly 18% lower than at the end of 2011 (2.02%). The expected delinquency rate would still be 25% higher than the pre-recession levels observed in Q4 2008 (1.32%).

 
NATIONAL CONSUMER CREDIT DELINQUENCY RATE (THE RATIO OF BORROWERS 90 OR MORE DAYS PAST DUE ON ALL CREDIT PRODUCTS) AND YEARLY PERCENT INCREASES OBSERVED/EXPECTED
Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014
1.32% 2.87% 2.63% 2.02% 1.93% 1.76% 1.66%
X 117.4% -8.4% -23.2% -4.5% -8.8% -5.7%
             

"While we are expecting delinquency levels to drop next year -- and remain significantly lower than just a few years ago -- there is a slight concern that delinquencies could rise once interest rates increase," said Higgins. "At this time, we do not believe interest rates will rise enough to materially impact delinquency levels."

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. 

About TransUnion
As a global leader in information and risk management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering high quality data, and integrating advanced analytics and enhanced decision-making capabilities. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. Based in Burlington, Ontario, with global headquarters located in Chicago, Illinois, TransUnion provides local service and support throughout Canada. Visit www.transunion.ca to learn more.

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