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Credit Habits of Gen Z

The future of Canada’s housing market lies in its youngest demographic — Generation Z.

While Generation Z may be young, they are coming of age now and beginning to be increasingly credit active.

According to TransUnion Canada, nearly 1.8 million Canadian Gen Z consumers are now credit active — 63% of the demographic.

We have dug into the insights to provide the must-know facts.

Who is Gen Z?

Gen Z encompasses the demographic born during or after 1995 to 2010. In 2020, they range in age from 15 to 25 years old.

According to TransUnion, in Q2 2019 Gen Z made up 28% of Canada’s population. 8% of that group — 2.8 million people — were eligible to apply for credit.

Key facts about Gen Z include:

  • Some have watched their parents struggle with economic hardship, especially if they were old enough during the 2008 to 2011 timeframe.
  • Despite this, they appear to have a strong appetite for credit.
  • They are the most technological demographic and they have come to expect a digital customer experience — including accessing, using, and managing credit.

Most Popular Credit Products 

According to TransUnion, Gen Z’s top credit products so far are:

  • Credit cards (99.8%)
  • Student loans (28%)
  • Personal loan (16%)
  • Line of credit (6%)
  • Auto (5%)

TransUnion found that credit cards are the most popular credit products amid Gen Z consumers as they can be a key entry point to the credit market. On average, credit limits are lower, but credit habits remain healthy.

99.8% of Canada’s credit-active Gen Z crowd has a credit card. The median balance per consumer is $515 — which is lower than their U.S. counterparts.

Compared to the overall credit active population, TransUnion found that Gen Z consumers were more likely to near-prime or prime. 50% had credit scores in the prime and above risk tiers.

This could present an opportunity for card lenders to market to lower-risk Gen Z consumers, TransUnion noted.

Mortgages are the Fastest Growing Credit Product

While mortgages were not on the list of most popular credit products yet, they may soon be as they are the fastest-growing credit product among Gen Z.

According to TransUnion, the fastest-growing credit products are:

  • Mortgages (71%)
  • Line of credit (48%)
  • Auto (28%)
  • Credit card (16%)
  • Student loans (11%)

A new survey also found that while one-in-five Canadians who are not already homeowners fear they will never be able to purchase a home, Gen Z was much more optimistic. The survey showed that 81% of Gen Z respondents said they will own a home at some point in the future. Further, 10% of them said they already own a home.

It makes sense that mortgages would be growing among this demographic as some credit-active Gen Z consumers will have graduated post-secondary school and be firmly in the job market. As the cohort grows older, this will only increase.

The July 2019 Teranet Market Insight Report, which focused on first-time homebuyers in Ontario, found that in recent years, we have seen the entrance of Gen Z into the housing market. While their volumes were minimal, they were increasing.

From 2017 to 2018, the Gen Z condo segment grew from 0.7% to 0.9% and the non-condo segment grew from 0.1% to 0.3%.

Read the full Teranet report here: https://www.teranet.ca/commercial-solutions-blog/july-2019-teranet-market-insights-report/

In Summary

While not all of Gen Z is credit active yet, the majority are — and more are on their way. They are shaping the future of the credit market. Are you prepared?

Read the full TransUnion study here: https://newsroom.transunion.ca/gen-z-consumers-start-to-shape-canadian-credit-market-as-they-become-increasingly-credit-active/

Have you been targeting Gen Z consumers in your lending or mortgage marketing? Share with us on social media. Purview is on FacebookTwitter, and LinkedIn.

Our in-depth property solutions can help assess credit risk for Gen Z and other demographics. Monitor key mortgage market insights and make informed risk decisions. Learn more by calling 1-855-787-8439 or visiting www.purview.ca.

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