TransUnion’s Canada Industry Insights Report (IIR) for Q4 2017 reveals that, as Canadian consumer debt continues to rise, it’s the two youngest generations that are playing a larger, more critical role in the consumer credit market than before. We highlight some of these report findings here.
Consumer debt on the rise, especially among youngest generations
According to TransUnion’s Q4 2017 Industry Insights Report, Canadian consumer debt continues to rise. The average consumer non-mortgage debt balance is $29,312, up 4.3% from Q4 2016 to Q4 2017.
Millennials and Generation Z: Non-mortgage debt increases from Q4 2016 to Q4 2017
What’s interesting is the higher increases in debt balances for Millennials (born between 1980 and 1994) and Generation Z (born from 1995). Balances for Millennials are up by 12.6% in that same period, likely due to the life stage of many consumers in this generation. For many, the cost of living has gone up as they’re now financing homes and their children’s education.
Gen Z debt balances are up by a significant 22.9% from two years ago and it’s likely this trend will continue. Estimates are that his segment of the population will grow from about 25% to 30% in a few years, which means more young people will be taking on credit for the first time.
Comparing Consumer Credit Performance by Generation
Millennials and Gen Z playing a larger role in Canadian credit marketplace
Overall, Millennials and Generation Z make up 31.6% of of the consumer credit market—and their market share has gone up by a considerable 12.2% in the last two years. Millennials have surpassed Gen X in terms of market share for consumer credit since the end of 2016. Gen Z currently makes up 7% of market share, and this will also grow as these consumers start using credit more.
Change in percentage of market share between Q4 2015 and Q4 2017
In contrast, there’s been a decline in the number of Baby Boomers (born between 1946 and 1964) and Generation X (born between 1965 and 1979) consumers with credit. This growing increase in market share among the youngest generations makes their credit performance especially significant.
Q4 2017 Canadian Consumer Credit Debt/Delinquency Picture
Consumer credit market performing well
The overall risk tier mix has improved in the last year, with 68.0% of consumers ranked Prime or better (up 2.3%) and more consumers having access to credit (28.5 million; up 0.4%).
Serious delinquency levels for all major credit products also continue to perform well, though recent Bank of Canada rate increases may be starting to affect some consumers. Gen Z consumers are the only ones showing increased delinquency. Sloppy payment behaviour among this generation could be attributed to the fact that they are new to credit and are learning about credit rules as they go.