Global Insights: Credit demand, Debt, and Arrears

International responses to the conflict in Europe have far-reaching ramifications on both regional economies and global trade. Regions across the globe are closely monitoring delinquency rates as inflation hits its highest level in decades. What does this mean for credit demand, debt, and delinquency trends around the world and Canada in particular? Here are three areas of focus according to our Global Insights Report Q1 2022.


Credit Card spending surges

Credit card demand is at pre-pandemic levels. Consumer reliance on credit cards is up, with new card volume showing a 5.1% increase compared to Q1 2020 in Canada. In the US, the average credit limit increased by 24% in the past year. Despite the post-holiday seasonal drop in Q1 2022, average monthly credit card spending per consumer rose 17.5%, when compared to the lows of Q1 2021, and up 8.1% when compared to the pre-pandemic period Q1 2020. This increase in consumer spending is due to pent-up demand and renewed travel post-lockdowns. It is important for lenders to look for early signs of consumer stress as a result of increased credit card spending and rising inflation. Cautious lending and credit monitoring are required to assess a consumer’s capacity to borrow. 


A drop in non-mortgage debt has reversed globally

A drop in non-mortgage debt has reversed globally, except in Spain. This increase is driven by pre-COVID levels of spending. In Canada, the average non-mortgage debt per consumer is $20,744, an increase of 1.5% compared to Q1 2021. It is the first YOY increase since 2020. Looking globally, the total mortgage debt continued to rise in the US by 9% year-over-year for March and increased by 14.5% over 24 months in Australia. With inflation increasing the cost of living on top of mortgage debt, lenders will be pressured to ensure affordability practices are up to standard. 


Early cycle delinquencies are starting to pick up

Early cycle delinquencies are starting to pick up in some regions. Non-mortgage delinquency in Canada is at 0.88%, a 2.1% increase from last quarter but still 15.7% lower than Q1 2021. Credit cards, auto, and bank loans are the first products where delinquencies have started to show quarter-over-quarter increases. In contrast, delinquency remains stable in Argentina after the pandemic. This stability could be due to their entity’s focus on collection management. With arrear rate increases inevitable, collections practices and identifying financially vulnerable customers will be more important than ever. 

What to watch out for next in terms of global trends are increasing inflationary pressures and Buy Now Pay Later, BNPL. BNPL is gaining traction in Canada and Equifax is looking for ways to evaluate the potential impact on the card market as well as product opportunities. 

We want to help Canadians live their financial best. To learn more about how understanding our latest global insights and credit trends can help boost business growth, please contact your Equifax Account Representative. You can also reach us directly at 1-855-233-9226 and follow us on Twitter and LinkedIn.  


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