Canada's credit landscape in 2023 is showing rises in lending, with more Canadians gaining access to lending products via traditional financial institutions and private lenders. At the same time, as the cost of living bears down on Canadians, thanks to inflation and steeper interest rates, credit has become their shelter from the financial storm.
In a pivotal move, the Canadian government, in April 2023, introduced a cap, setting the ceiling for interest rates at 35% across all loan providers. The fallout of this is that borrowers, particularly those who could not gain favour with established financial giants, found credit freedom with non-conventional lenders, who now came across as less financially daunting.
A trend is clear in five of the big six Canadian banks. Their recent Q2 earnings reports reveal a sharp elevation in provisions for credit losses, especially when juxtaposed with the same period in 2022.
Though slow to make the move, Canadians are gradually warming up to the allure of "buy now, pay later" (BNPL) schemes. Propelled by escalating e-commerce engagement, the impact of economic slowdown and increased awareness among clients, the uptake of BNPL has witnessed a robust ascent since the latter part of 2022.
Tightening purse strings suggest a turbulent road ahead. Strained disposable incomes might see consumers faltering on their payments, portending a spike in delinquency rates as we move through 2024 and beyond.
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Consumer Lending
Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.
See All of Our DefinitionsThis report originates from Passport, our Consumer Lending research and analysis database.
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