Consumers hungry for credit

Consumers’ appetite for credit will keep growing, finds FICO’s quarterly survey of U.S. and Canadian bank risk professionals.

Forty-six percent of respondents expect the amount of new credit requested by consumers to increase over the next six months, while just 16% expect it to decrease.

The survey also finds 46% of bankers expect requests for credit-line increases to go up, while 8% expect such requests to go down. On consumer credit, 53% of lenders polled expect credit card balances to increase over the next six months, while 7% expect balances to decrease.

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“Despite recent warnings from the federal government and the Bank of Canada regarding high household debt-to-income ratios, our survey shows that 54% of the respondents believe Canadian consumers will request more credit in the next six months, compared to the North American average of 46%,” Cheryl Woodburn, senior director of FICO Canada.

Half of all respondents said borrowers in the 30-39 age range will drive the most growth. Nearly a quarter of respondents (22%) 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.

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When it comes to risk, the concern centered on student loans. Nearly half of respondents (49%) expect an increase in student loan delinquencies, while 15% 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.

Three quarters of bankers believe interest rates will rise in the next six months. Less than 1% of respondents expect interest rates for consumer credit to decrease, the lowest level in the survey’s three-year history.

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Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.