Millennials, Gen Z Canadians are borrowing money at faster rates than baby boomers: report

A new report by TransUnion Canada reveals that Canada’s millennial and Gen Z consumers are making headwinds on baby boomers in the consumer credit market.

According to the report, the country’s youngest borrowers are leading in credit growth, with their overall share of the Canadian market rising to 12.2 per cent over the past two years.

The report found that the share of all credit-active consumers in the millennial and Gen Z age ranges increased from 28 per cent in Q4 2014 to 30 per cent in Q4 2016, and increased even further to 31.6 per cent in Q4 2017.

“We consider the baby boomers the folks that are getting out of the credit market. They’re older, they’re trying to deleverage and get into retirement, where the Gen X and the millennials are the ones that are really carrying the debt burden. They’re in the late stages where they’re either starting with families or they’re well into debt and have families,” said Matt Fabian, director of research and industry analysis for TransUnion Canada.

Furthermore, the report also found a high rate of credit growth among Gen Z, though smaller balances are expected.

“The younger kids that are just getting out of school and just starting out, we see that they’re kind of entering that credit cycle life cycle and their balances are growing quite substantially. That balance is small compared to the debt burden of the other generations but it’s gaining momentum,” Fabian continued.

As credit rates increased among younger Canadians, so did delinquency rates — especially across Gen Z consumers. The report predicts that a lack of experience managing credit could be the driving factor behind these increased delinquency rates.

He also notes that while increased delinquency is more common in consumers that are just starting to build credit, today’s young Canadians might be especially susceptible due to the greater use of ease-of-access digital payments platforms.

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“It is a life stage thing, where you’d expect that somebody coming in. We noticed one thing that I think is maybe unique… the new generation that is coming in really doesn’t see a lot of use of cards. That might be because they’re tied to digital wallets and Apple Pay and things like that,” he said.

However, Fabian notes that delinquency doesn’t necessarily mean bankruptcy.

“Overall, I think Canadians manage debt fairly responsibly,” Fabian said. He explains that while the Bank of Canada’s recently-announced interest-rate hikes have many concerned, many Canadians will be able to manage them effectively.

“With the interest-rate hikes, the majority of Canadian people that are affected are those that are meeting their minimum payment obligations, maybe slightly paying over, and those are the people that are just above water in any interest-rate increases. The rest of Canadians are people that are already making well over their minimum payments,” said Fabian.