Low interest rates, coupled with the housing segment’s recent performance, proved to be major factors
Mortgage originations largely impelled the credit market rebound seen during the second quarter, driven by a strong housing market and low interest rates, according to TransUnion.
In its just-released Q2 2021 TransUnion Canada Credit Industry Insights Report, TransUnion said that consumer demand for credit is gradually returning to pre-pandemic levels, with credit applications increasing by 5% year over year in June.
A substantial increase in home sales volume and average sale prices pushed mortgage originations up by 37.5% annually. New mortgage originations accounted for $96 billion of new mortgage debt in the quarter, up 59.5% during the same time frame. The average mortgage balance per consumer also grew by 8% over the past year, reaching $304,772.
Read more: StatsCan on the troubling pace of mortgage debt growth
TransUnion said that stricter mortgage qualification requirements triggered a notable shift in the risk distribution of new mortgages. During the second quarter, the majority of new mortgages were issued to Canadians with credit scores of 760 or higher, leading to a 53% annual increase of above-prime mortgages. Conversely, the volume of subprime mortgage originations fell by 31% year over year.
“Consistent with consumers paying down debt, delinquencies fell across all credit products throughout the pandemic,” TransUnion said.
Overall consumer delinquency ticked down by 0.63% annually to 1.96% as of the second quarter.
“With the economy reopening and many Canadians returning to some normalcy, we expect to see overall consumption and demand ramp up,” said Matt Fabian, director of financial services research and consulting at TransUnion. “As consumer confidence soars and the pandemic recovery continues, lenders need to be prepared to meet the increase in credit demand.”
