Summary of the Experian Consumer Default Index Q1 2024 Report

The Experian Consumer Default Index (CDI) for Q1 2024 provides a comprehensive overview of the credit landscape in South Africa, focusing on the default behaviour of consumers with various types of loans. This report also includes insights into macroeconomic trends affecting consumer credit behaviour, the market appetite for credit, and the performance of credit consumers.

Key Insights from the Q1 2024 Report

1. Current State of Consumer Default Index (CDI)

• The composite CDI remained stable from December 2023 to March 2024 at 4.69, indicating a plateau in consumer defaults. However, a year-on-year (Y-o-Y) deterioration from 4.56 to 4.69 was noted, albeit at a slower rate compared to previous quarters.
• Home loans saw a significant Y-o-Y deterioration of 21%, primarily contributing to the overall CDI deterioration. Credit card defaults also increased by 5%, highlighting on-going financial pressures on mid-to-high affluence consumers.

2. Economic Influences

• The Consumer Price Inflation (CPI) has stayed within the South African Reserve Bank’s target band of 3%-6% since June 2023. The CPI was at 5.3% in March 2024, slightly lower than in previous months, easing some pressure on household expenditures.
• Despite a stable CPI, the high cost of living continues to challenge consumers, impacting their ability to meet debt obligations.

3. Market Appetite for Credit

• The market appetite for credit reached a record high volume in Q4 2023. However, approval rates remain low at just over 30%, indicating stricter lending criteria amidst economic uncertainties.
• Both secured and unsecured new credit product sales were slow to recover in Q1 2024, following the typical post-festive season downturn.

4. Consumer Behaviour and Credit Performance

• The report observed that while consumers continue to face challenges in honouring debt commitments, the rate of deterioration in credit defaults has slowed. This suggests some stabilisation in consumer credit performance.
• Vintages in home loan portfolios showed a long-term deteriorating trend, surpassing that of vehicle loans.

5. Financial Affluence Segmentation (FAS)

• FAS Groups 1 and 2, representing higher affluence segments, exhibited the most significant Y-o-Y deterioration in their CDI. These groups also account for 43% of total credit products under debt review applications.
• In contrast, FAS Groups 3 to 6 showed improvement in their CDI, indicating better credit performance among lower affluence segments.

6. Credit Product-Specific Insights

• Home Loans: Significant deterioration observed, indicating continued financial stress among homeowners.
• Vehicle Loans: Slight improvement noted, with a decrease in the default rate.
• Credit Cards: Continued deterioration, reflecting on-going financial pressures.
• Personal Loans and Retail Loans: High default rates persist, with minor fluctuations.

Experian solutions

The report leverages Experian’s data, analytics, and technology solutions to provide insights into consumer credit behaviour. These include consumer macro- and micro-segmentation, analytics benchmarking reports, and macro-economic views.

Conclusion

The Q1 2024 Experian Consumer Default Index highlights the complex dynamics of the South African credit market, where consumers face continued economic pressures. Despite some stabilization, significant challenges remain, particularly for home loans and credit cards. The insights provided by Experian’s data and analytics solutions are crucial for understanding these trends and making informed decisions in the credit market.

For more detailed information, you can access the full report here.