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TransUnion Canada Revises 2020 Credit Forecast Amid COVID-19 Pandemic

Non-mortgage delinquency in Canada forecast to increase to 6.9% by end of Q3 2020.



Canadian consumers were already feeling debt pressure coming into the crisis, with non-mortgage delinquency rates up 39 bps at end of March from previous quarter to 5.75% - marking highest observed level since 2015.

TORONTO, May 21, 2020 (GLOBE NEWSWIRE) -- As the COVID-19 pandemic continues to bring unprecedented pressures on consumersa?? ability to repay their debt obligations, TransUnion (NYSE: TRU) today released a new multi-scenario credit forecast.TransUniona??s current scenario projects that overall non-mortgage delinquency in Canada will peak at 6.9% at the end of Q3 2020 before gradually dropping back down to 6% at the end of Q1 2021. For context, the non-mortgage delinquency rate in Q1, which straddled pre- and post-COVID worlds, was 5.75%, and concluded Q4 2019 at 5.61%.a??As unemployment reaches levels not seen in several years, ita??s important to take a step back and reassess how COVID-19 will impact the consumer credit market in the coming quarters,a?? said Matt Fabian, director of financial services research and consulting at TransUnion. a??Elevated unemployment and its effect on consumersa?? income and ability to pay debt obligations is a primary driver of increased delinquency. The various government relief benefits, combined with deferral programs provided by lenders, can act to offset some of the COVID-related delinquency. However, each of these measures may contribute to long-term risk at a future time, as consumers will generally still be responsible for paying these deferred obligations at some point in the future.a??The updated forecast indicates that the economic effects will likely not be evenly distributed by region. Certain provinces, such as those more dependent on industries heavily impacted by the lockdown, like tourism and travel, are likely to be more adversely affected. Additionally, the energy provinces including Alberta and Newfoundland could potentially be even harder hit with the combination of COVID restrictions and the economic impact of plummeting oil prices.The revised forecast, for example, estimates the non-mortgage serious delinquency rate in Alberta to reach 8.3% at the end of Q3 2020. Lenders are already preparing for these and other scenarios, building and executing against their downturn crisis playbooks with a goal of mitigating risk while still supporting consumers who may be suffering through the crisis a?? especially those that are only struggling due to the crisis and would otherwise be reliable customers.
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