TransUnion’s most recent Q2 2024 Consumer Pulse study reveals that
financial optimism is low among Canadians, with over half (58%)
reporting that they are not optimistic about the state of their
household finances over the next 12 months. A further 65% of study
respondents indicate that they feel Canada is currently in a
recession or will enter one before the end of 2024. An even higher
percentage, 86%, say inflation is in their top three household
financial concerns over the next six months – the highest
percentage since TransUnion began tracking it quarterly in Q2 2022.
This economic cycle could be the driver of increased demand for
credit, with over a quarter (27%, up four percentage points from Q1
2024) of Canadians saying they plan to apply for new or refinance
existing credit in the next year, potentially reflecting the need
for additional liquidity.
Almost half (46%) of Canadians say that their
household finances are worse than planned at this point in 2024, up
four percentage points from a year ago. This is despite 79% of
Canadians who reported that their income either stayed the same or
increased in the last three months. In comparison, 21% reported
that their household income decreased in the last three months and
40% expect their household income to increase in the next year.
While the study finds that the majority of Canadians say their
income has either stayed the same of increased, 57% feel their
income is not keeping up with the rate of inflation.
“While income levels are holding steady overall,
our data indicates that cost of living increases continue to put
pressure on household finances and are fueling a decline in
financial optimism among Canadians. Many Canadians are tightening
spending and looking to take on more credit to help with cash flow.
With the Bank of Canada recently lowering the prime interest rate
for the first time in four years we may see some of these trends
around taking on new credit or refinancing existing loans
accelerate,” said Matthew Fabian, director of financial services
research and consulting. “This is especially likely for younger
Canadians, who indicated that interest rates play a larger factor
in their decision to take on new credit.”
Other key findings of the study include:
Canadians feeling the strain of
increased cost of living
Low (61%) and medium household incomes (57%) and
older Canadians say their household incomes aren’t keeping up with
inflation the most, with 66% of Gen X and 60% of Baby Boomers
indicating this. Many Baby Boomers and some Gen Xers are at or near
retirement, meaning they may have fixed retirement incomes which
increases the pressure of inflation.
As this pressure rises, consumers must make
trade-off choices as to where money is directed. Essential goods
such as groceries and gas tend to be considered as spending
priorities, potentially leaving less disposable income available to
cover credit debt. As seen in the most recent TransUnion Consumer
Industry Insights report, 1.3% of Canadians are only paying the
minimum balance in their credit card.
Shifts in saving patterns and taking on
more debt
Despite some Canadians only making minimum
payments on their credit cards, there was a four-percentage-point
increase in the number of Canadians who say they paid down debt
faster in the last three months, when compared to Q1 2024.
Other ways Canadians reported they adjusted
their saving patterns in the last three months include:
- Saving more in their emergency fund
(17%)
- This increases significantly for
Gen Z (28%)
- Cutting back on saving for
retirement (16%)
- Increasing usage of available
credit (16%)
- Using their retirement savings
(11%)
- Saving more for retirement
(10%)
Canadians anticipate shifts in household
spending
Canadians are showing concern about the
increased cost of goods for non-discretionary items saying they
were most concerned with the increased cost of:
- Groceries (89%)
- Gasoline for cars (61%)
- Utilities (52%)
In the next three months, Canadians are
anticipating their spending habits to accommodate the rising cost
of living. While over a third (38%) expect to increase the amount
they pay for bills and loans, over half (52%) said they’ll cut back
on discretionary spending (dining out, travel and entertainment).
In fact, 57% say they already cut back on discretionary spending in
the last three months, and a significant percentage say they
canceled subscriptions or memberships (29%) and canceled or reduced
digital services (24%) in that timeframe.
Interest rate levels impact appetite to
take on more debt Nearly two-thirds (62%) of Canadians
indicate that rising interest rates have a high or moderate impact
on whether they’ll apply for new credit in the next 12 months. This
percentage increases among Gen Z at 77% and Millennials at 74%,
compared to 59% of Gen X and 47% of Baby Boomers.
Nearly one in three Canadians struggling
to pay their bills and loans in fullThirty percent of
Canadians report that they expect to be unable to pay at least one
of their current bills and loans in full meaning some may need to
tap into savings or take on additional credit to pay these
balances. Among those who said they couldn’t pay at least one
current bill and loans in full, 35% intend to pay a partial amount
they can afford.
Other ways Canadians said they plan to help pay
their currents bills and loans among those who said they couldn’t
pay at least one:
- Nearly one-third (32%) of Gen Z
plan to use their available credit card.
- Nearly a quarter (23%) of Gen X
don’t know how they’re going to pay for their bills/loans.
Of those planning to take on more debt,
69% say they’ll either apply for a new credit card or increase
available credit on their existing card Of those who plan
to take on new or refinance existing credit in the next 12 months,
nearly half (47%) expect to apply for a new credit card and 22% say
they’ll increase available credit on their existing credit card.
This is despite a historic record of 31.5 million Canadians holding
at least one credit product (an increase of 3.75% YoY).
Other forms of additional credit that Canadians
plan to apply for in the next year include:
- New personal loan (20%)
- New car loan or lease (18%)
- Refinance mortgage, home loan or
bond payment (17%)
- New mortgage (15%)
- New buy now, pay later payment
services (12%)
- New home equity line of credit
(11%)
- Refinance car loan (10%)
Gen X is feeling the most financial
strain Gen X appears to be the most stressed about their
financial situation, with 53% reporting their household finances
are worse than expected – the highest among generations surveyed.
This can potentially be attributed to them carrying a large amount
of debt like mortgages, and some nearing retirement. As noted
earlier in this press release, this age group had the highest
percentage (66%) of Canadians who said their incomes are not
keeping with the current inflation rate.
Over a third (35%) of Gen X surveyed don’t
expect to be able to pay at least one of their current bills and
loans in full, higher than the 30% overall. This could again be
attributed to the large amount of debt this generation is
carrying.
Despite concern around interest rates
and rising cost of living, Canadians still believe in the
importance of credit
Canadians overwhelmingly see the value of
credit, with 87% saying that access to credit and lending products
is important to achieve their financial goals. However, over half
(52%) believe they don’t have sufficient access to these
products.
Of all age demographics, only Baby Boomers (71%)
report a majority of respondents believe they have sufficient
access to credit and lending products.
The complete Consumer Pulse study can be viewed
here.
*The most recent Consumer Pulse study includes a
survey of 1,000 Canadian adult consumers conducted May 1-10, 2024.
About TransUnion®
(NYSE: TRU)TransUnion is a global information and
insights company with over 13,000 associates operating in more than
30 countries, including Canada, where we’re the credit bureau of
choice for the financial services ecosystem and most of Canada’s
largest banks. We make trust possible by ensuring each person is
reliably represented in the marketplace. We do this by providing an
actionable view of consumers, stewarded with care.
Through our acquisitions and technology
investments we have developed innovative solutions that extend
beyond our strong foundation in core credit into areas such as
marketing, fraud, risk and advanced analytics. As a result,
consumers and businesses can transact with confidence and achieve
great things. We call this Information for Good® — and it leads to
economic opportunity, great experiences and personal empowerment
for millions of people around the world.
For more information visit: transunion.ca
For more information or to request an
interview, please contact:
Katie DuffyEmail: katie.duffy@ketchum.com
Telephone: +1 647-772-0969
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