Credit card spending rises as inflation soars

0

TORONTO, June 02, 2022 (GLOBE NEWSWIRE) — Consumer reliance on credit cards is growing, with average monthly credit card spending rising 17.5% in the first quarter of 2022 from lows in the first quarter of 2021, according to the latest consumer credit trends and outlook report from Market Pulse. Ontario saw the largest increase in credit card spending (up 20.4%), followed by Quebec (18.4%) over the same period last year.

“Pent-up demand and increased travel with the easing of COVID restrictions, combined with soaring inflation, has led to some of the largest increases in credit card spending we have ever seen. Unfortunately for consumers, this is also at a time when the Bank of Canada is raising interest rates,” said Rebecca Oakes, vice president of advanced analytics at Equifax Canada. “Across all age groups, Gen Z and Millennials are the fastest growing consumer spenders. With gasoline and food prices increasing at a rate higher than overall inflation, it is very important for consumers to review their budget allocations.

The volume of new cards increased by 31.2% compared to the first quarter of 2021 and by 5.1% compared to the first quarter of 2020. Lenders are offering higher credit limits to consumers on new credit cards, the average credit limit on new cards this quarter exceeding $5,500, the highest in seven years.

Overall credit card balances increased 9.5% this quarter compared to the first quarter of 2021 and 2.4% compared to last quarter. This is the largest year-over-year increase in credit card balances since the start of the pandemic, but these balances have yet to reach pre-pandemic levels.

Total consumer debt continues to grow
Total consumer debt increased by 8.6% in the first quarter of 2022, reaching $2.3 trillion over the past 12 months. On an individual basis, average consumer debt (excluding mortgages) is now $20,744, an increase of 1.5% from Q1 2021. This is the first year-on-year increase in the other since 2019.

New car financing and comparable bank loan* volumes were down 1.1% and 6.4% year-on-year, respectively. However, high car prices continue to drive up the average loan size for new cars ($26,000) and comparable bank loans ($31,000) by 5.9% and 10.2%.

Housing market shows steep decline from 2021 highs
Multiple interest rate hikes coupled with seasonality pushed new mortgage volume down 13.2% this quarter from highs in Q1 2021, but levels are still above pre-pandemic numbers . New HELOCs also posted a seasonal decline, but remained 6.6% higher compared to the first quarter of 2021. Some of the largest declines were seen in the hottest housing markets, Ontario and Colombia. -British, with 15.7% and 17.6% year-on-year. decline in the volume of new mortgages.

“First-time home buyers are feeling the heat from rising interest rates,” Oakes said. “Despite some stabilization in house prices, the Bank of Canada’s interest rate hikes are reducing consumer affordability. First-time home buyers not only take out larger loans, but with high interest rates, they also pay more in monthly installments, unlike early 2021 first-time buyers who enjoyed lower rates and payments.

The volume of first-time buyers fell 16.1% in the first quarter of 2022 compared to the first quarter of 2021. As first-time home buyers struggle to find an affordable price, the proportion of consumers with multiple loans mortgages continue to rise. Nationally, 17% of consumers have more than one active mortgage in Q1 2022, up 2.5% from Q1 2021 and 9.3% from the interest rate period high in Q1 2018.

Slight increases in non-mortgage default rates
The 90+ day non-mortgage default rate rose to 0.88%, up 2.1% from last quarter, but still 15.7% lower than Q1 2021. Early signs of stress are more visible among younger consumers, with non-mortgage default rates up 20.9% and 5.1% from last quarter for those under 25 and 25-34, respectively. Credit cards, car and bank loans are the first products for which delinquencies have started to increase quarter on quarter.

“While overall delinquency rates are still well below pre-pandemic levels, we project a steady increase in delinquency through the end of the year,” Oakes said. “The good news is that we are still below pre-pandemic levels for missed payments for consumers. However, increased credit card spending and potential credit dependency for consumer products necessities can lead to increased stress in the months to come.

Age group analysis – Debt and delinquency rate (excluding mortgages)

Medium
Debt
(Q1 2022)
Change in average debt
Year after year
(Q1 2022 vs. Q1 2021)
Delinquency
Assess

(Q1 2022)
Change in delinquency rate
Year after year
(Q1 2022 vs. Q1 2021)
18-25 $8,129 -4.09% 1.37% -3.71%
26-35 $16,832 2.83% 1.27% -14.53%
36-45 $25,084 3.57% 0.97% -18.09%
46-55 $31,442 2.82% 0.72% -19.48%
56-65 $26,165 1.12% 0.66% -17.01%
65+ $14,386 0.35% 0.79% -12.35%
Canada $20,744 1.54% 0.88% -15.66%

Analysis of major cities – Debt and delinquency rate (excluding mortgages)

Town Average debt
(Q1 2022)
Change in average debt
Year after year
(Q1 2022 vs. Q1 2021)
Delinquency
Assess

(Q1 2022)
Change in delinquency rate
Year after year
(Q1 2022 vs. Q1 2021)
Calgary $24,987 -1.22% 1.13% -13.30%
Edmonton $24,259 -1.13% 1.36% -11.68%
Halifax $20,822 -1.68% 0.96% -20.61%
Montreal $15,999 5.01% 0.76% -18.57%
Ottawa $18,454 2.70% 0.78% -18.82%
Toronto $19,904 4.65% 1.06% -15.71%
Vancouver $22,449 3.64% 0.64% -18.76%
St. John’s $23,553 -0.63% 1.10% -20.86%
Fort McMurray $37,320 -1.16% 1.55% -9.51%

Provincial analysis -Debt and delinquency rate (excluding mortgages)

Province Average debt
(Q1 2022)
Change in average debt
Year after year
(Q1 2022 vs. Q1 2021)
Delinquency
Assess

(Q1 2022)
Change in delinquency rate
Year after year
(Q1 2022 vs. Q1 2021)
Ontario $20,878 2.87% 0.83% -17.20%
Quebec $17,989 2.40% 0.60% -15.10%
New Scotland $20,568 -2.02% 1.14% -16.12%
New Brunswick $21,728 -2.55% 1.25% -15.61%
PEI $21,916 0.41% 0.78% -24.49%
Newfoundland $22,792 -0.55% 1.16% -18.97%
eastern region $21,492 -1.72% 1.16% -17.05%
alberta $25,051 -1.39% 1.27% -13.22%
Manitoba $16,670 -1.34% 1.13% -4.23%
Saskatchewan $22,269 -1.80% 1.21% -11.24%
British Columbia $21,616 2.35% 0.76% -15.83%
Western region $22,392 0.16% 1.03% -13.61%
Canada $20,744 1.54% 0.88% -15.66%

* Comparable bank loans are installment loans with limits between $5,000 and $100,000
** Based on Equifax data for Q1 2022

About Equifax
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics and technology company, we play a vital role in the global economy by helping financial institutions, businesses, employers and government agencies make critical decisions with greater trust. Our unique blend of differentiated data, analytics and cloud technology generates insights to support decisions to move people forward. Headquartered in Atlanta and supported by more than 13,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe and the Asia-Pacific region. For more information, visit Equifax.ca.

Share.

Comments are closed.