Despite challenging economic conditions, serious consumer credit delinquency rates in South Africa declined across most major consumer lending categories in the third quarter of 2018, on an annual basis.
This is according to TransUnion’s inaugural Industry Insights Report which is based on the company’s dataset of over 23 million South African consumer credit records.
TransUnion’s new report found that home loans – the credit product with the highest total balances outstanding – also had the lowest serious balance-level delinquency rate in the most recent quarter.
As of Q3 2018, home loans comprised 1.84 million accounts and R888 billion in total balances.
The balance-level serious delinquency rate—measured as three or more payments past due—saw a 10-basis point decline in the last year to close the quarter at 3.8%.
While almost all other credit products also experienced yearly declines in serious delinquency rates, TransUnion noted that vehicle and asset finance (VAF) loans – the credit product with the second highest total balances – experienced a 50-basis point year-over-year rise to 4.1% in Q3 2018.
Approximately 2.5 million VAF accounts were open with total balances of R414 billion.
“Tough economic conditions continue to prevail in South Africa, as consumers’ wallets have been challenged by continued high unemployment rates, weak wage gains, significant fuel price hikes, and the ongoing rand weakness,” said Carmen Williams, director of research and consulting for TransUnion South Africa.
“In light of these conditions, it would be reasonable to expect a deterioration in consumer credit performance over the past year.
“However, we have seen largely the opposite, with serious delinquency rates improving for most credit products since Q3 2017.
“This is certainly welcome news for the South African credit market and the recently announced improvement in GDP for Q3 2018 is indeed an encouraging development that could result in more positive consumer credit trends in future quarters.”
Williams said that there are multiple potential drivers of this improved delinquency rate over the past year.
“Originations growth for most consumer credit products has been relatively slow in recent quarters, likely due to more cautious underwriting practices by lenders,” she said.
“We also suspect that consumers, in the face of a challenging economy, may be more focused on keeping their credit relationships in good standing, thereby maintaining their access to credit going forward. This trend was also echoed by the results of our recent Consumer Credit Index research, which indicated cautious consumer credit behaviour.”