12 Apr 2012

Equifax Canada announces new economic indicator - Credit Seeking Index

 

Toronto, ON, Thursday, April 12, 2012 - According to Equifax Canada’s Credit Seeking IndexTM, a new metric in the company’s quarterly Consumer Credit Trends Report (for Q1 period ending in March), demand for new credit by Canadian consumers is only 3 per cent less than it was prior to the 24-month financial crisis which began in 2008. 

The Credit Seeking Index is a ratio which calculates the velocity of consumer credit applications for a period of time as compared to the average of credit applications received in 2007. 2007 is considered to be a fair representative year for typical consumer credit applications volume.

"Our Credit Seeking Index is a great indicator of consumers’ appetite for new credit as it indicates the actual number of credit-seeking inquiries, or credit applications, received by the Financial Institutions within a month as compared to "normal" activity. It is the best proxy for helping us understand consumer behaviour as it relates to new or additional credit being sought," says Nadim Abdo, Vice President, Consulting & Analytical Services, Equifax Canada.

An index value greater than 100 implies that credit applications have increased as compared to 2007, while an index value less than 100 implies that credit applications have decreased as compared to 2007.

For example, an index of 105 implies that consumer credit applications are 5 per cent higher than they were in 2007. Conversely, a ratio of 95 implies that consumer credit applications are 5 per cent less than they were in 2007.

The Equifax Report also revealed the largest increase in outstanding balances is in auto finance loans and lease portfolios, which grew by 10 per cent over the same period last year.

The report found that total consumer indebtedness in Q1 2012 (excluding mortgage debt), increased by 3.4 per cent compared to the same period last year. New loans opened in Q1 2012 were nearly 1 per cent higher than they were a year earlier.

"It is not surprising to see consumer credit continue to increase given the significantly improved levels of consumer delinquencies and bankruptcies witnessed in the last year, coupled with record-low consumer borrowing rates," adds Abdo.

For detailed graphs, please go to:

 

http://www.equifax.com/international/canada/Consumer_Credit%20Trends_Q12012.pdf

  

Other Equifax Canada Q1 quarterly Consumer Credit Trends Report findings include:

  • Credit card debt has continued to decrease for the past 6 quarters. It decreased by 2.1 per cent in Q1 2012, from the same period last year. This is the only consumer credit portfolio which shows a decline in balances.
  •  Average bank installment loans grew by 3.7 per cent over the same period last year and average bank revolving loans (lines of credit) grew by only 1.4 per cent.
  • 90-day delinquencies continue to improve and have decreased by 7.6 per cent as compared to the same period last year.
  • Consumer bankruptcies have also continued to improve and have decreased by 3.1 per cent from the same period last year.