Global Credit Trends

Executive Summary

Here are 3 top trends in the first half of 2024:

Economic pressures impact young adults

High cost of living and increased cost of credit are affecting young adults at a greater rate. Consumers under 36 years of age are particularly impacted with high auto loans and lines of credit delinquency rates. Plus, a growing number of young Canadians are finding themselves living with their parents and grandparents. Currently, almost one in three Canadian households (29.2%) include adult children living with their parents, up from 26.7% a decade ago.

Younger consumers more susceptible to holiday spending hiccups

Over the past two years, credit cards issued in Q4 have shown a higher rate of delinquency compared to cards issued in other quarters. This trend coincides with increased demand for credit cards since 2022, driven by inflation and economic challenges. Young consumers are more likely to both use unsecured credit for holiday spending and fall behind on payments; the credit card delinquency rate for 18-25 year olds opening accounts in Q4 is 2x the rate for consumers aged 36-50.

Increased digital activity leads to increased fraud risk

As digital interactions continue to increase, so do fraud vectors, including Synthetic Identity Fraud. In the United States, the number of credit applications for auto loans tagged with having a risk of Synthetic IDs increased from ~5% in 2019 to above 8% in 2023. Overall, credit applications with a Synthetic ID risk have a delinquency rate 3 to 5 times higher vs the portfolio average.

Glossary of Common Terms & Sources

Overall Debt

Non-mortgage debt continues to grow but at a gradual pace.

Chart data is indexed as of Q4 2019, except India which is Q4 2021.The New Zealand index was rebased in Q4 2021 due to account adjustments.
Chart data may not include all countries represented in the chart legend.

Mortgage Debt

United States: Overall first mortgage debt continues to increase, up 2.5% YoY, but continues to grow at a slower pace as a result of higher interest rates in the US. Supply constraints are also easing in both new and used home inventory, providing prospects for more originations if rates start to fall

Canada: Slower than average growth in mortgage debt. Despite fewer home sales in Q2, average mortgage loan amounts rose by 6.1% YoY and 5.5% from the previous quarter

Australia: Mortgage account originations continued to slow at 2% below last year. National average limit per new account increased 10% YoY holding up overall portfolio growth of 4%

India: Mortgage debt increased by 16% YoY. Non mortgage debt increased in the range of 18-22% YoY with gold loans seeing the maximum increase

Non-Mortgage Debt

United States: Non-mortgage debt increased by ~4% YoY, driven by increases in credit card debt (8%) and auto debt (1.9%). Credit card originations limits are on the rise and is currently 8% higher than the same time a year ago

Canada: Consumer debt levels rose to $2.5 trillion in Q2’24, marking a 4.2% increase since Q2’23. Credit cards continued to be the primary driver of rising debt with outstanding balances reaching $122 billion, up 13.7% from Q2’23

United Kingdom: Gradual long term increasing trend in credit card balances, likely driven by increased costs. Total credit card balances up 7.7% YoY

Spain: Slight increase in mortgage debt, which is still decreasing in the long term, while non-mortgage debt appears to be stable as already observed in the last year and a half

Argentina: Non-mortgage debts remained stable compared to the last quarter

Ecuador: Non-mortgage debt remains unchanged due to weakness of demand (0.6% annual estimate rate in 2024) in the private demand sector and the lack of liquidity

Debt: Money borrowed by consumers at a point in time. Refers to amortized limit or outstanding balance depending on data collected from each region, except Spain which reports just defaulted assets because the Spanish Bureau manages negative data only.

Non-Mortgage: Includes Buy Now Pay Later, credit cards, installment loans, personal loans and automobile loans. Availability and coverage will vary by region.

Supply

The mortgage market is recovering as cash rate reliefs flow through most regions in the recent quarter. New credit card originations remain high as consumers keep up with inflation.

Chart data is indexed as of Q4 2019, except India which is Q4 2021
Chart data may not include all countries represented in the chart legend

North America

Canada: The mortgage market remained strained due to high interest rates through 1H’24. Although new mortgage originations improved by 21.3% from 2023 lows, they were still well below typical second-quarter levels

South America

Argentina: Demand is showing signs of stabilization, building upon the positive trajectory observed since the start of 2024, although with a slight increase

Ecuador: Non-mortgage demand presents a slight increase compared to Q1, reflecting the first trimester without a fall since 2022

Europe

Spain: Credit demand in Spain is stable with respect to 1H’23

Oceania

Australia: The decline in secured credit growth is expected to persist, with mortgage originations falling by 2% compared to last year, mirroring the decrease seen in the previous quarter. This trend is likely to continue due to significant reduction of refinancing activity compared to last year

New Zealand: Mortgage demand softened in Q2, falling back from the stronger levels seen at the end of last year and beginning of this year — largely echoing the trends seen in house prices. Personal loan demand was also weak in Q2 on the back of more individuals believing it a poor time to buy a major household item — with the weakness most prominent in younger borrowers

India: Mortgage demand continued to increase with a growth of 8% in demand compared to the last year. Unsecured loans which were having a huge run up in growth have seen a softening in growth after the central bank’s tightening of monetary policies by 10%

Credit Card Focus

Card utilization is relatively flat despite high growth in credit card debt and card delinquencies are starting to flatten out for many regions.

Chart data is indexed as of Q4 2019, except India which is Q4 2021
Chart data may not include all countries represented in the chart legend

Card Utilization

United States: Credit card utilization is around ~21% — 50 bps higher than a year ago — on the back of increased credit limits, with total credit card limits 8% higher than a year ago, and balances 8% higher than a year ago

Canada: Huge growth in new originations coupled with increasing credit limit on new cards is keeping credit card utilization flat

Argentina: Lower credit card utilization (-7%) due to an increase in credit card limit, but constant spending

Ecuador: Credit card utilization remains stable due to increase in credit limits in the overdebt sector. Total credit card debt increased 2.2% in Q2’24, attributable to the persistent stagnation in the labor market recovery

Delinquency

United States: Credit card delinquency is nearing pre-pandemic levels after a runup in 2023. Severe delinquency rates (60+ DPD $ delinquencies ex: write-offs) stand at 1.8%. Newer vintages are still exhibiting higher delinquency rates vs. those vintages originated during the pandemic

Canada: Average credit card balance per consumer continued to grow despite a slowdown in consumer spending. This increase was primarily attributed to a reduction in card pay rates, with consumers under 35 years of age seeing the fastest decline in card payment levels

Brazil: The delinquency rate for credit card remains stable in 1H’24, after a few quarters of increase

India: The delinquency for credit cards has gone up by 17 bps YoY; credit card stress is increasing in the Indian economy