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mortgage credit growth from transunion

Mortgages Lead Credit Growth as Delinquency Rates Decline

Mortgage credit grew in the fourth quarter of 2020 as Canadian consumers took steps to reduce all other forms of debt, according to new data from TransUnion.

The credit agency’s Q4 Industry Insights Report showed mortgage credit grew 5.6% year-over-year, while the average balance of mortgage loans outstanding rose 5.7% to $292,863.

Meanwhile, new originations of unsecured credit were mostly down sharply, led by personal lines of credit (-36.9%), followed by credit cards (-35.4%), personal loans (-18%) and auto loans (-2.9%).

“The Canadian credit market remained stable as consumers have been deleveraging and many have improved their risk scores,” the report noted. “However, new lockdown restrictions to prevent future waves of COVID-19 and the winding down of deferral programs are expected to create additional stress in managing debt obligations.”

Overall, total credit growth in the quarter rose 3.7% to $68.9 billion, driven “overwhelmingly” by mortgage growth, TransUnion reported.

Credit Quality Improving as Delinquencies Remain at Historic Lows

Many have been watching delinquency rates for signs of potential stress from consumers as government relief and mortgage deferral programs mostly wound down by the end of 2020. But TransUnion’s latest data shows delinquency rates remain at record lows.

“Despite deferrals ending for a majority of consumers, delinquency rates remained lower compared to the prior year across all products,” the report reads.

Credit cards were the only form of credit to see a small rise in delinquencies, which were up 5 bps from Q3. Overall, non-mortgage delinquencies in Canada were down more than 28% year-over-year.

“We expect to see some increase in delinquency rates through 2021, especially among the most economically vulnerable consumers, but the current signs suggest that Canadians generally will be able to absorb the impact and that deferral and government support programs have been relatively effective at supporting consumers through the pandemic,” said Matthew Fabian, Director, Research and Industry Insights, in a statement. “Delinquency rates, however, are sensitive to economic events like interest rates, unemployment and income, so the long-term impact will depend significantly on how these progress through 2021.”

Mortgage Delinquencies Fall in 26 Cities

Fresh data from the Canada Mortgage and Housing Corporation and Equifax, as reported by Better Dwelling, also showed a decline in delinquency rates across a majority of major real estate markets.

Southern Ontario is currently home to the lowest delinquency rates, with Guelph reporting the lowest rate in the country at just 0.05%, down 28.6% year-over-year. Delinquency rates in the major metro areas were also down substantially in Q4:

  • Toronto: 0.10% (down 9.1% year-over-year)
  • Montreal: 0.20% (down 26%)
  • Vancouver: 0.13% (unchanged)