A survey by predictive analytics and decision management software firm FICO has found that Canadian consumers’ appetite for credit loans will continue to expand in the coming years. In a survey conducted among Canadian bank risk professionals, it was learned that 46 percent of those polled expect the amount of new credit requested by consumers to increase over the next six months, while just 16 percent expect it to decrease.
The survey, conducted for FICO by the Professional Risk Managers' International Association (PRMIA), also found that 46 percent of bankers in the survey expect requests for credit-line increases to go up, with eight percent expecting such requests to go down. Regarding the use of consumer credit, 53 percent of lenders polled expect credit card balances to increase over the next six months, while seven percent expect balances to decrease.
"The theme of the economic recovery seems to be 'slow and steady'," said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Both consumer spending and income ticked up slightly during the summer. I'm sure that contributed to the feeling among our respondents that consumer borrowing is poised to increase. It remains to be seen if the government shutdown causes consumers to tighten their purse strings."
30s Group: Key to Increased Demand in Lending
When asked about the anticipated growth in their lending portfolios, half of all respondents (50 percent) said that borrowers in the 30-39 age range will drive the most growth in credit loans. Nearly a quarter of respondents (22 percent) expect borrowers aged 20-29 to be the largest source of growth. Eighteen percent of respondents felt that growth in their lending portfolios would be largest among borrowers aged 40 or older.
Banks Prepared to Meet Credit Demand
Bankers also predicted that supply of consumer credit loans for multiple types of loans to also rise with more than 70 percent of respondents expect supply to meet demand for new residential mortgages and small business loans. Over 80 percent of respondents expect supply to meet demand for mortgage refinancing, credit cards, auto loans, and student loans. There were no loan types for which respondents expect demand to exceed supply.
Student Loans: Perennial Concern of Lenders
When it comes to risk, the concern centered on one loan type: student loans. Nearly half of respondents (49 percent) expect an increase in student loan delinquencies, while 15 percent expect a decrease. This is the eighth consecutive quarter in which there was significant concern about delinquencies on student loans.
Eleven percent of respondents expect the total number of consumer credit delinquencies to decrease, the lowest number on record. Sixty-two percent of respondents expect the total number of delinquencies to remain flat.
Intrest Rates to Rise in 6 Months
Bankers overwhelmingly (72 percent) believe interest rates will rise in the next six months. Less than one percent of respondents expect interest rates for consumer credit to decrease, the lowest level in the survey's three-year history.
A detailed report of FICO's quarterly survey is available at https://www.prmia.org/sites/default/files/references/PRMIAFICO3rdQuarterOct2013F.pdf.
www.PRMIA.org.
www.fico.com.
Article Created: 2013-10-18
Article Updated: 2013-11-13
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