Mortgages continued to lead all forms of credit growth as of the second quarter, rising over 45% compared to pre-pandemic levels, new data shows.

More than 390,000 new mortgage accounts were opened in the second quarter, a rise of 48.6% from a year ago and 45% compared to the second quarter of 2019, according to a recently released report from TransUnion.

That amounted to $145 billion worth of new mortgage debt in the quarter, an 82% jump from last year.

“The rapid appreciation in prices might still keep the mortgage market growing modestly for the near term,” TransUnion’s report reads.

The average mortgage balance also rose to $379,567, a 22% jump year-over-year. Similar data from Equifax showed an 18% increase in average mortgage balances to $360,000.

The demand for other credit facilities was mixed, according to the report. Newly originated lines of credit were up 86% compared to 2020 and nearly 6% compared to Q2 2019, while auto loans were up 43% from a year ago but down 7.5% from 2019 levels.

Overall, the number of new Canadians with credit rose slightly by 1%, driven by Gen Z consumers—those born in or after 1995—which reached 3.4 million active consumers as of the third quarter of 2021, up 16% from a year earlier.

“Consumer credit activity is heating up as the economy reopens and consumer confidence improves,” said Matt Fabian, director of financial services research and consulting at TransUnion. “As the recovery continues, lenders are loosening the tighter risk policies that were put in place during the pandemic, accelerating the supply of credit in the market and emerging for growth to meet consumer demand.”

Delinquencies down, but could start to rise

Even as credit continues to grow, delinquencies in all credit segments continued to drop in the third quarter.

Mortgage delinquencies fell to 0.13%, down five basis points (bps) from a year earlier. Meanwhile, delinquencies in unsecured personal loans were down 11 bps to 0.70%, lines of credit saw a 5-bps drop to 0.13% and auto loan delinquencies were down 17 bps to 0.43%.

“High levels of consumer liquidity helped drive down delinquencies, and government subsidies continued to support consumers, helping prevent them from either becoming delinquent or rolling forward to higher levels of delinquency,” TransUnion noted.

One of the side effects of the pandemic was an increase in the savings rate and consumers paying down their credit balances. That, plus government support programs, helped bring delinquency rates down. But with a reopening of the economy underway and spending on the rise, that could start to change.

“As we emerge from the pandemic, we expect to see the year-over-year reduction in balances taper off as spending is likely to ramp up, especially with holidays around the corner,” said Fabian.  “Market competition for acquisition and share of wallet for revolving products like credit cards is expected to be high, as balances remain well below pre-pandemic levels. These conditions, combined with a recovering economy, should poise lenders for an urgency to grow prudently.”

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