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Big Gains for All Four Credit Sectors in Q2 2021

Big Gains for All Four Credit Sectors in Q2 2021

The Q2 2021 data is out, and it points to a strong recovery for the financial services industry, according to the TransUnion Q2 2021 Quarterly Credit Industry Insights Report (CIIR).

As we hit the mid-point of 2021, we saw a resurgence across all sectors, with auto, credit card, personal loan and mortgage showing signs of life. Financial institutions are returning to lending and extending credit, and originations were up in both mortgage and auto, with personal and credit card narrowing the gap.

On the road to recovery

TransUnion has expanded our traditional CIIR and we’re now providing the Credit Industry Indicator (CII), which offers new insights on credit activity and the financial performance of US consumers.

How it works: The indicator aggregates consumer credit data to show the impact of economic and market events on consumer credit health. Data elements are summarized on a quarterly basis to analyze changes in credit health and are categorized under four pillars: demand, supply, consumer behavior and performance. These are combined into a single, comprehensive measure that reflects the current state of consumer credit health.

The latest CII shows measured improvement and increased lender confidence, with the indicator most recently reaching a high of 128 in Q2 2021, up from 87 in Q2 2020. This significant jump demonstrates that consumers are rebounding from the pandemic and surpasses the 127 CII observed pre-pandemic in Q1 2020. 

“The latest CII indicates that we are well on the road to recovery, and we expect CII levels to continue to grow over the course of the year, so long as COVID cases drop, reopening plans continue and consumer spending levels remain robust,” said Matt Komos, Vice President of research and consulting.


Source: TransUnion US consumer credit database

For more information about the new Credit Industry Indicator (CII), please click here. For more information about the report, please register for the TransUnion Q2 2021 CIIR Webinar.

Read on for more for more specific insights about auto loans, credit cards, mortgages and personal loans. 

Consumer credit trends in the auto sector: Q2 2021

In Q2 2020, the auto finance industry began to feel the impact of the economic shutdown brought on by the pandemic. One year later, the auto finance industry is bouncing back and showing significant growth, with the number of auto loan originations increasing to 7.4 million — compared to 6.3 million over the same period last year.

  • Originations continue to grow and were up 16.3% YoY with growth observed across all credit tiers
  • Overall consumer credit performance improved to a delinquency rate of 1.23% (borrowers 60+ DPD), a rate that is on par with pre-pandemic numbers
  • The subprime risk tier has seen 5.9% origination growth, with serious delinquency rates for this risk tier slowing YoY for the first time since the beginning of the pandemic

Our view: Despite a rise in vehicle prices due to supply shortages, we’re seeing a rapid increase in auto loans. Lenders have continued to manage the risk in their portfolio, buoyed by continued consumer resiliency as the economy rebounds.

Q2 2021 auto loan trends

Auto Lending Metric Q2 2021 Q2 2020 Q2 2019 Q2 2018
Number of Auto Loans 83.2 million 83.5 million 82.7 million 80.9 million
Borrower-Level Delinquency Rate (60+ DPD) 1.23% 1.51% 1.23% 1.23%
Average Debt Per Borrower $20,466 $19,397 $18,952 $18,676
Prior Quarter Originations* 7.4 million 6.3 million 6.7 million 6.8 million
Overall Origination Growth Rate (YoY) 16.3% -5.3% -0.9% 0.9%
Subprime** Origination Growth Rate (YoY) 5.9% -16.7% 1.8% -1.9%
Average Balance of New Auto Loans* $24,115 $22,360 $21,403 $20,877

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
**Note: VantageScore 3.0 standard risk tiers: Subprime= 300-600; Near Prime= 601-660; Prime= 661-720; Prime Plus= 721-780; Super Prime= 781-850

Consumer credit trends in the credit card sector: Q2 2021

Both consumer and lender confidence are driving recovery, as originations continue to rebound. Additionally, consumers with access to credit cards reached another all-time high at 192 million, a 2.8% increase from the same period last year.

  • After experiencing YoY declines of -17.7% in Q4 2020 and -34.1% in Q3 2020, originations narrowed to a decline of -3.3% in Q1 2021
  • Significant growth occurred in the subprime risk tier, which jumped 22.7% YoY, a sign that the supply and demand for credit is normalizing
  • Total balances decreased 4.1% YoY, while the super prime risk tier grew 8.9% YoY, a leading indicator that super prime consumer confidence is driving an increase in spending
  • Consumer performance remains strong with serious delinquency rates at a historical low, falling to 0.95% of borrowers 90+ DPD

Our view: Confidence in the economy is growing as consumer spending continues to increase and key credit card metrics move at or above 2019 pre-pandemic levels. To meet consumer demand, issuer supply has broadly returned to market, with uncertainty being managed through lower credit line assignments. Consumer credit card defaults are at historical lows; however, card issuers continue to be prudent with the risk mix of consumers and have shifted credit line growth toward lower risk consumers.

Q2 2021 credit card trends

Credit Card Lending Metric Q2 2021 Q2 2020 Q2 2019 Q2 2018
Number of Credit Cards 464.9 million 453.6 million 439.2 million 422.2 million
Borrower-Level Delinquency Rate (90+ DPD) 0.95% 1.49% 1.72% 1.54%
Average Debt Per Borrower $4,817 $5,223 $5,635 $5,534
Prior Quarter Originations** 15 million 15.5 million 15.3 million 14.5 million
Total Balances ($B) $707 billion $737 billion $796 billion $755 billion

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

Consumer credit trends in the mortgage sector: Q2 2021

Mortgage origination volumes remain strong and showed a significant 78% YoY increase compared to the same time last year.

  • GSE loans doubled (110%) YoY, while Jumbo and FHA loan types grew at a much slower pace — 28% and 22% YoY, respectively
  • Refinances, which accounted for the bulk of origination volume in Q1 2021 with 60% of total originations, declined to 58.4%
  • Rising home prices pushed the average balance of new mortgage loans to a record $298,115, driving total balances to $10.3 trillion, another record
  • Account performance remains steady as mortgage account delinquencies declined to 0.60% 90+DPD in Q2 2021, 29% lower than the same period last year (0.84% 90+DPD)

Our view: Low interest rates are still driving mortgage origination activity across the board. Refinancing is once again outpacing purchase volume as consumers take advantage of historically low rates for Rate and Term and Cash Out refinancing. While new home purchase activity is still robust, rising home prices could be pricing some borrowers out of the market. The rising home values have driven mortgage balances to record highs, and we expect origination volumes to remain healthy.

Q2 2021 mortgage trends

Mortgage Lending Metric Q2 2021 Q2 2020 Q2 2019 Q2 2018
Number of Mortgage Loans 51.2 million 50.7 million 49.9 million 49.7 million
Account-Level Delinquency Rate (90+ DPD)* 0.60% 0.84% 0.94% 1.18%
Prior Quarter GSE Originations** 2.2 million 1.0 million 0.5 million 0.6 million
Prior Quarter Refinance Origination Share** 58.4% 49.1% 26.3% 30.7%

*Note: Delinquency rates are based on data reported to TransUnion.
**Note: Originations are viewed one quarter in arrears to account for reporting lag.

Consumer credit trends in the personal loan sector: Q2 2021

The unsecured consumer lending industry continues to show signs of recovery, with balances increasing 1.7% QoQ for the first time since the pandemic began. Lenders are taking a measured approach and gradually extending more credit.

  • Consumer-level delinquencies fell, improving to 2.28% 60+DPD, 26% lower than Q2 2020
  • Delinquency rates remain well below historical trends and stand at their lowest level since 2015
  • Average new account balances grew 7.5% YoY, driven by growth across all risk tiers

Our view: These positive trends signify health in the personal loan market, with many lenders looking to ramp up originations to meet renewed consumer demand after the industry saw a drop during the pandemic. Increased spending is expected to continue throughout the year as more consumers look to access credit. Given this trajectory, originations should begin to show growth, especially as loan performance remains strong.

Q2 2021 unsecured personal loan trends

Personal loan metric Q2 2021 Q2 2020 Q2 2019 Q2 2018
Total balances $146 billion $153 billion $145 billion $123 billion
Number of Unsecured Personal Loans 20.7 million 22.2 million 21.6 million 19.5 million
Number of Consumers with Unsecured Personal Loans 18.7 million 20 million 19.6 million 17.9 million
Borrower-level delinquency rate (60+ DPD) 2.28% 3.10% 3.14% 3.23%
Average debt per borrower $9,079 $8,895 $8,596 $8,018
Prior quarter originations* 3.2 million 3.9 million 3.8 million 3.5 million
Average Balance of New Unsecured Personal Loans* $7,129 $6,631 $6,662 $6,345

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

For more information about the report, please register for the TransUnion Q2 2021 CIIR Webinar.


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