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All Signs Point to a Healthy Credit Market in 2022

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The concerns which tightened lending practices during the pandemic seem to be wearing off.

According to the newly released Q4 2021 Quarterly Credit Industry Insights Report (CIIR), at the end of 2021, lenders continued to ramp up new account origination growth in the non-prime segment of the market.

That’s because consumer credit performance remained healthy across auto, credit card, personal loans and mortgages. Accounts originated during the pandemic in 2020 continued to perform as well or better when compared to loans from previous years.

In fact, TransUnion looked at the 12-month performance of loans originated in 2020 compared to earlier years to better gauge consumer credit health — and the news is promising: All credit products either outperformed or had similar performance compared to accounts opened in 2018 and 2019.

Q4 2021 Credit Industry Insights Report

Further, despite recent upticks in delinquencies, serious delinquency rates also remained near or below pre-pandemic levels in the wake of expired forbearance programs, which has continued to restore lender confidence.

“Toward the end of 2021, the majority of accommodation programs expired, and lenders have seen consumers continue to perform well on their credit obligations. Lenders are eager to pursue growth, including expanding back into the non-prime consumer segment,” said Charlie Wise, Senior Vice President of Research and Consulting at TransUnion.

For more information about the report, please register for the Q4 2021 Quarterly Credit Industry Insights Report Webinar. Read on for more specific insights about credit cards, personal loans, auto loans, mortgages and the Credit Industry Indicator.

Consumer credit trends in the credit card sector: Q4 2021

Card issuers are expanding access to credit and using it as a growth strategy to offset consumers carrying lower balances.

  • Originations saw a dramatic rebound in Q3 2021, increasing 63.5% YoY to a record 20.1 million new accounts
  • Up to 45% of originations came from below prime consumers, the highest proportion of originations occurring in this segment of the market since 2010
  • Non-prime originations increased 75% YoY from the 5.1 million non-prime originations that occurred in Q3 2020
  • The number of consumers with a credit card reached a high of 196 million in Q4 2021
  • The average balance per consumer increased slightly to $5,127 in Q4 2021, up from $5,103 in Q4 2020 but still below the pre-pandemic average of $5,818

Our view: While card balances are showing a slight improvement compared to a year ago, average balances are still below those observed before the pandemic. Balance growth has mostly come from the super prime cohort, and card issuers will continue to offer higher credit lines to those consumers. Card issuers are also tapping into new consumer risk segments to ramp up growth.

Q4 2021 credit card trends

Credit Card Lending Metric Q4 2021 Q4 2020 Q4 2019  Q4 2018
Number of Credit Cards 485.9 million 454.9 million 456.8 million 432.1 million
Borrower-Level Delinquency Rate (90+DPD) 1.48% 1.30% 2.19% 1.94%
Average Debt Per Borrower $5,127 $5,103 $5,818 $5,726
Prior Quarter Originations* 20.1 million 12.3 million 18.7 million 16.4 million
Average New Account Credit Lines* $4,468 $3,820 $5,221 $5,260

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Consumer credit trends in the personal loan sector: Q4 2021

The personal loan market has markedly rebounded and returned to pre-pandemic levels, with balances even exceeding Q4 2019 numbers.

  • Origination volumes have returned to pre-pandemic levels with 5.1 million in Q3 2021, exceeding the 5 million loan originations in Q3 2019
  • The average new account balance grew by 23.8% YoY to $7,104 in Q3 2021
  • Personal loan balances increased to an all-time high of $167 billion in Q4 2021

Our view: Strong origination volumes (especially in below prime segments) coupled with material balance growth is an indication of lender confidence in consumer financial health.

Q4 2021 unsecured personal loan trends 

Personal Loan Metric Q4 2021 Q4 2020 Q4 2019  Q4 2018
Total Balances $167 billion $145 billion $157 billion $136 billion
Number of Unsecured Personal Loans 22.8 million 21.2 million 23.3 million 21.1 million
Number of Consumers with Unsecured Personal Loans 19.9 million 19.3 million 20.8 million 19.1 million
Account-Level Delinquency Rate (90+ DPD) 1.78% 1.71% 2.31% 2.54%
Borrower-Level Delinquency Rate (60+ DPD) 3.00% 2.70% 3.48% 3.66%
Average Debt Per Borrower $9,622 $8,795 $8,780 $8,240
Prior Quarter Originations* 5.1 million 3.5 million 5.0 million 4.6 million
Average Balance of New Unsecured Personal Loans* $7,104 $5,739 $6,211 $6,153

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Consumer credit trends in the auto sector: Q4 2021 

Consumer performance remains healthy, especially notable given the majority of pandemic forbearance programs have expired. However, reduced vehicle inventory and semi-conductor chip shortages continue to drive down vehicle affordability as prices increase, which is impacting originations.

  • YoY origination rates remained flat in Q3 2021 at 7.3 million
  • Average balance of a new or used auto loan grew to $26,976, a 14% YoY increase over the same period last year
  • Average monthly payments have increased from $459 in Q3 2019 pre-pandemic to $531 in Q3 2021

Our view: Dealerships continue to face challenges around vehicle supply, and while originations stayed relatively flat in Q3 2021, uncertainty surrounding when those issues might be resolved continue to hang over the auto industry. That, coupled with rising vehicle prices, will impact auto sales through the remainder of 2022.

Q4 2021 auto loan trends 

Auto Lending Metric Q4 2021 Q4 2020 Q4 2019  Q4 2018
Number of Auto Loans 82.4 million 83.5 million 83.8 million 82.0 million
Borrower-Level Delinquency Rate (60+DPD) 1.59% 1.57% 1.50% 1.45%
Prior Quarter Originations* 7.3 million 7.3 million 7.5 million 7.1 million
Average Monthly Payment* $531 $473 $459 $443
Average Balance of New Auto Loans* $26,976 $23,671 $22,223 $21,510
Average Debt Per Borrower $21,210 $19,791 $19,183 $18,833

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

**Data from IHSM Catalyst

Consumer credit trends in the mortgage sector: Q4 2021

While still far above pre-pandemic origination levels, we’re seeing a slowdown in the piping hot mortgage sector, largely because rising interest rates have made it less attractive to secure a rate and term refinance.

  • Mortgage originations dropped -13% YoY to 3.4 million in Q3 2021
  • Refis saw a YoY decrease of -42%, but cash-out refi grew by 14% YoY, reflecting homeowners’ increase in home equity
  • Purchase volume remained flat; purchase share of originations grew from 53% in Q2 2021 to 55% in Q3 2021
  • Home prices continue to rise; total mortgage balances reaching a record level of $10.7 trillion, up 9% YoY and the highest annual growth rate since before 2010
  • The average new loan amount increased 4% YoY to over $305,000, the result of low inventory, high consumer demand and rising home prices

Our view: With the pool of consumers who would benefit from a refinance shrinking and interest rates starting to rise, mortgage lenders need to implement diversified growth strategies. With demand still high, new consumer populations, such as the low-to-moderate income consumer segment, could be lucrative in the coming year.

Q4 2021 mortgage trends

Mortgage Lending Metric Q4 2021 Q4 2020 Q4 2019  Q4 2018
Number of Mortgage Loans 51.2 million 50.7 million 50.3 million 49.5 million
Account-Level Delinquency Rate (90+DPD) 0.59% 0.76% 1.05% 1.13%
Prior Quarter Originations 3.4 million 3.9 million 2.3 million 16 million
Mortgage Origination* Distribution Purchase 55% 48% 62% 78%
Mortgage Origination Distribution Refinance 45% 52% 38% 22%
Average Balance of New Mortgage Loans* $312,801 $296,506 $286,913 $252,602

*Originations are viewed one quarter in arrears to account for reporting lag.

Q4 2021 CIIR Credit Industry Indicator Summary

We introduced the TransUnion Credit Industry Indicator (CII) in 2021 to provide a consolidated view of the overall health and direction of the consumer credit market — looking at the components of consumer credit demand, supply, behavior and performance.

In Q4 2021, the CII increased by 16 points YoY to 115, a clear indicator the credit market has seen solid improvement over the past year.

  • CII growth was driven by the strong growth in consumer credit demand and supply throughout 2021, continued growth in credit balances and steady credit performance by consumers
  • The CII dropped in Q4 from Q3 2021 when it hit 126, the highest level over the past decade, a trend that’s typical in Q4 due to seasonal factors
  • Recent upticks in delinquency rates, which remain well below pre-pandemic levels for most products, and the slowing of new auto loan and mortgage originations due to supply constraints and pricing pressures, also impacted the CII

Our view: Due to growing consumer confidence and lenders making credit available across the risk spectrum, consumer credit demand and supply have rebounded in a big way. Consumers have access to credit — and they’re using it — which is the sign of a healthy market.

US Credit Industry Indicator Q4 2021

Click here for more information on the Credit Industry Indicator.

For more information about the report, please register for the Q4 2021 Quarterly Credit Industry Insights Report Webinar.

Related Insights

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