Significant drop in new mortgages, consumers lean more

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TORONTO, March 07, 2022 (GLOBE NEWSWIRE) — Growth in new mortgage loans declined 8.1% in the fourth quarter of 2021 compared to the fourth quarter of 2020, according to the most recent Home Credit Outlook and Trends report. Consumer Market Pulse from Equifax Canada. The biggest drop in new mortgages was seen in some of the hottest housing markets like Toronto and Hamilton with a drop of 16.1% and 18.7% respectively from the fourth quarter of 2020.

“There is no doubt that soaring home prices have reduced housing affordability in all segments,” said Rebecca Oakes, assistant vice president of advanced analytics at Equifax Canada. “In addition to high house prices, lenders have also started raising interest rates in anticipation of Bank of Canada rate hikes. It could also limit the purchasing power of many consumers.

The average loan size for new mortgages shows an increase of 10.1% in the fourth quarter of 2021 compared to the fourth quarter of 2020, but it fell by 1.5% compared to the previous quarter of the third quarter of 2021. is the first time the average loan size for new mortgages has posted a quarter-over-quarter decline since the start of the pandemic. Oakes noted that this could be a sign of stabilization in average home prices. However, continued demand and lack of supply could lead to further increases in property prices. The average loan size for new mortgages is $355,000 in Q4 2021.

CREDIT CARD SPENDING HIGHER THAN EVER
Total consumer credit card spending increased 14.4% from the fourth quarter of 2020 and 9.8% from last quarter. Average monthly credit spend per credit card consumer is now $2,205, up 15.2% this quarter from Q4 2020 and 6.8% from the pre-pandemic period of Q4 2019 .

“The holiday season always drives spending up, but the fourth quarter of 2021 saw higher-than-ever average credit card spending per credit card consumer,” Oakes said. “Consumer payment behavior is slowly returning to pre-pandemic levels as disposable income from government benefits dries up, but consumers are paying less for every dollar spent compared to the same time last year.”

Consumers pay $0.96 for every dollar spent, which is down 2.9% from Q4 2020. The increase in spending is also reflected in the overall credit card balance, which increased by 2, 4% from Q4 2020. Demand for credit cards is rising again with further card growth finally reaching pre-pandemic levels. The average credit limit on new cards increased 23.2% from Q4 2020 ($4,966) due to increased demand and lender confidence.

Total consumer debt continues to grow
Overall consumer debt is $2.2 trillion, an increase of 7.9% from the fourth quarter of 2020. On an individual basis, average consumer debt (excluding mortgages) is now $20,686 , a decrease of 0.6% compared to the fourth quarter of 2020.

“Lower auto debt and installment loans were the main drivers of lower average debt this quarter,” Oakes said. “Overall average debt is low, but a slight increase in average debt is visible in some segments.”

New auto finance and comparable bank loan balances were down 7.5% and 1.5%, respectively, year-over-year. Besides the seasonal drop in demand, the delay in vehicle delivery due to supply chain issues also slowed the growth of new cars.

Delinquencies continue to decline

Overall, delinquencies remained low, with mortgage delinquencies at 0.11% and non-mortgage delinquencies at 0.86%, both posting a year-over-year decline of 31.8% and 20 .7% respectively.

However, a slight increase in chargeback rates in some product segments was visible towards the end of 2021. The chargeback rate over 90 days for credit cards increased by 2.7% and auto chargebacks not banks rose 14.7% from the third quarter of 2021. “High inflation impacts the extent to which a dollar stretches day-to-day for consumers,” Oakes added. “Delinquencies are likely on the rise for the immediate future when you add the withdrawal of government support and COVID-19 restrictions that continue to hurt businesses.”

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

Age Average
Debt
(Q4 2021)
Change in average debt
Year after year
(Q4 2021 vs. Q4 2020)
Delinquency
Rate
(Q4 2021)
Change in delinquency rate
Year after year
(Q4 2021 vs. Q4 2020)
18-25 $8,318 -4.54% 1.13% -13.07%
26-35 $16,813 1.28% 1.21% -17.72%
36-45 $24,917 1.20% 0.96% -22.81%
46-55 $31,271 0.41% 0.72% -24.90%
56-65 $26,028 -1.47% 0.67% -20.68%
65+ $14,358 -1.80% 0.79% -19.30%
Canada $20,686 -0.60% 0.86% -20.65%

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

Town Average
Debt
(Q4 2021)
Change in average debt
Year after year
(Q4 2021 vs. Q4 2020)
Delinquency
Rate
(Q4 2021)
Change in delinquency rate
Year after year
(Q4 2021 vs. Q4 2020)
Calgary $25,082 -2.60% 1.12% -14.71%
Edmonton $24,313 -2.55% 1.33% -14.18%
Halifax $20,916 -3.21% 0.93% -23.91%
Montreal $15,939 3.28% 0.77% -25.28%
Ottawa $18,304 -0.79% 0.77% -20.49%
Toronto $19,747 1.79% 1.01% -22.59%
Vancouver $21,985 0.18% 0.65% -19.79%
St. John’s $23,818 -2.80% 1.12% -18.80%
Fort McMurray $37,987 -1.61% 1.52% -12.67%

Provincial analysis – Debt and delinquency rate (excluding mortgages)

Province Average
Debt
(Q4 2021)
Change in average debt
Year after year
(Q4 2021 vs. Q4 2020)
Delinquency
Rate
(Q4 2021)
Change in delinquency rate
Year after year
(Q4 2021 vs. Q4 2020)
Ontario $20,736 0.05% 0.80% -23.71%
Quebec $18,049 1.00% 0.60% -24.26%
New Scotland $20,704 -3.13% 1.11% -21.29%
New Brunswick $22,012 -3.53% 1.23% -19.98%
PEI $21,963 -1.11% 0.73% -26.94%
Newfoundland $23,010 -1.90% 1.16% -18.84%
eastern region $21,688 -2.86% 1.13% -20.58%
alberta $25,172 -2.64% 1.26% -14.38%
Manitoba $16,821 -2.51% 1.10% -13.20%
Saskatchewan $22,426 -2.72% 1.15% -15.42%
British Columbia $21,262 -0.55% 0.77% -18.20%
Western region $22,305 -1.77% 1.03% -15.90%
Canada $20,686 -0.60% 0.86% -20.65%

* Based on Equifax data for the fourth quarter of 2021

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.

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