Despite the turbulence of the last year due to the COVID-19 outbreak, the consumer credit market is poised to make a strong recovery.
As detailed in the just-released Q1 2021 TransUnion Industry Insights Report, consumers are performing well one year since the pandemic began, and both serious delinquency rates and consumer credit balances remain low. These recent trends have been buoyed by government and lender programs, which have provided the market with significant levels of liquidity.
Serious delinquency rates since the beginning of the pandemic
Credit product/delinquency rate | Q1 2021 | Q1 2020 |
---|---|---|
Credit card | 1.25% | 1.97% |
Mortgage | 0.74% | 1.03% |
Personal loan | 2.66% | 3.33% |
Auto loan | 1.51% | 1.37% |
*Delinquency rates are measured as 60+ days past due for auto and unsecured personal loans; 90+ days past due for credit cards and mortgages.
Loan activity has also been improving over the past two quarters. For example, credit card originations rose to 12.3 million (Q3 2020) and 15.5 million (Q4 2020) from the lows observed in Q2 2020 (8.6 million).
While credit demand will likely continue rising, delinquency rates may be pressured as an increasing number of accounts exit accommodation programs. Mortgage accommodations, which currently stand at 4.55%, will significantly impact the consumer wallet as these programs begin expiring this summer.
Percent of accounts in accommodation status since peak levels
Credit product/percent of accounts in accommodation status | Q1 2021 | Q1 2020 | Peak 2020* |
---|---|---|---|
Auto loan | 2.38% | 0.29% | 7.21% |
Credit card | 2.11% | 0.01% | 3.73% |
Mortgage | 4.55% | 0.34% | 7.48% |
Personal loan | 2.79% | 0.19% | 7.03% |
**The peak in accommodations occurred in May 2020 for credit cards and mortgages and June 2020 for auto and personal loans.
Still, the overall outlook remains promising. “As we near the first half of the year and more of the country opens, there’s a strong sense that pent up demand for new loans will lift the consumer credit market even higher,” says Matt Komos, Vice President of Research and Consulting at TransUnion.
For more information about the report, please register for the TransUnion Q1 2021 IIR Webinar. Additional resources for consumers looking to protect their credit during the COVID-19 pandemic can be found at transunion.com/covid-19. Read on for more for more specific insights about auto loans, credit cards, mortgages and personal loans.
Despite a decline in overall originations and new accounts, consumers with access to a credit card increased 2.1% in the last year to 188 million, a continuation of a 10-year growth trend. At the same time, credit card balances continued to decline as many consumers used stimulus payments and income tax returns to pay down those debts.
Our view: Origination activity is slowly returning to normal levels, and we anticipate increases starting this summer as the country opens and lenders loosen up a bit. While we expect serious delinquency rates to rise as accounts come out of accommodation status, we do not expect it to impact the market materially because the percentage of delinquent borrowers is low.
Q1 2021 credit card trends
Credit card lending metric | Q1 2021 | Q1 2020 | Q1 2019 | Q1 2018 |
---|---|---|---|---|
Number of credit cards | 454.6 million | 457.6 million | 432.8 million | 416.5 million |
Borrower-level delinquency rate (90+ DPD) | 1.25% | 1.97% | 1.89% | 1.78% |
Average debt per borrower | $4,791 | $5,653 | $5,554 | $5,472 |
Prior quarter originations* | 15.5 million | 18.9 million | 16.5 million | 16.0 million |
Average new account credit lines* | $3,696 | $5,128 | $5,296 | $5,283 |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Mortgage origination volume increased to more than 4 million in Q4 2020, 73% higher than at the same time last year, and the highest quarterly volume recorded since TransUnion began tracking the metric in 2011.
Our view: Low interest rates are driving high demand against record low inventory, which is increasing home values. That’s creating opportunities for homeowners to refinance and conduct cash-out refis. We anticipate delinquency rates to move higher once accounts come out of accommodation, but we also expect many consumers to do all they can to make payments and protect the equity in their homes.
Q1 2021 mortgage trends
Mortgage lending metric | Q1 2021 | Q1 2020 | Q1 2019 | Q1 2018 |
---|---|---|---|---|
Number of mortgage loans | 53.8 million | 53.9 million | 53.0 million | 53.1 million |
Account-level delinquency rate (90+ DPD)* | 0.74% | 1.03% | 1.06% | 1.29% |
Prior quarter originations** | 4.2 million | 2.5 million | 1.5 million | 1.8 million |
Average balance of new mortgage loans* | $296,505 | $286,912 | $252,600 | $249,273 |
Borrower-level delinquency rate (90+ DPD) | 0.68% | 0.78% | 0.91% | 1.14% |
Average debt per borrower | $222,849 | $215,178 | $209,402 | $203,887 |
*Delinquency rates are based on data reported to TransUnion.
**Originations are viewed one quarter in arrears to account for reporting lag.
Personal loan originations continued to decline on a year-over-year basis, though declines in such loans and new account balances are becoming less steep in more recent quarters. The decline in originations activity was most evident within FinTechs and bank lenders.
Our view: Consumer demand for personal loans will likely be dampened in the next few months as stimulus payments and tax refunds eliminate the need for such funds. We do expect to see more activity as states and more consumers seek personal loans to finance vacations and other large purchases.
Q1 2021 unsecured personal loan trends
Personal loan metric | Q1 2021 | Q1 2020 | Q1 2019 | Q1 2018 |
---|---|---|---|---|
Total balances | $146.2 billion | $162.4 billion | $143.0 billion | $120.0 billion |
Number of consumers with unsecured personal loans | 18.9 million | 20.9 million | 19.3 million | 17.6 million |
Borrower-level delinquency rate (60+ DPD) | 2.66% | 3.39% | 3.47% | 3.51% |
Average debt per borrower | $8,999 | $9,025 | $8,618 | $6,258 |
Prior quarter originations* | 4.17 million | 5.23 million | 4.99 million | 4.55 million |
Average balance of new unsecured personal loans* | $5,213 | $5,619 | $5,432 | $5,044 |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
The broader auto finance market continued to largely recover in Q1 2021 with average debt per borrower topping $20,000 for the first time since TransUnion began tracking the variable.
Our view: Fewer loans originated to borrowers is driving the slowdown and impacting the auto industry more so than any other credit product. While their performance continues to lag the overall market, we’re cautiously optimistic the combination of additional government stimulus, expanded vaccinations, falling unemployment and tax refund season will result in a rebound in subprime originations in Q1 2021 and beyond.
Q1 2021 Auto Loan Trends
Auto Lending Metric | Q1 2021 | Q1 2020 | Q1 2019 | Q1 2018 |
---|---|---|---|---|
Number of Auto Loans | 83.2 million | 83.8 million | 82.2 million | 79.7 million |
Borrower-level delinquency rate (60+ DPD) | 1.51% | 1.27% | 1.31% | 1.32% |
Average debt per borrower | $20,001 | $19,302 | $18,845 | $14,837 |
Prior quarter originations* | 6.7 million | 6.9 million | 6.7 million | 6.6 million |
Average Balance of New Auto Loans* | $24,677 | $22,764 | $22,128 | $21,670 |
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
For more information about the report, please register for the TransUnion Q1 2021 IIR Webinar.
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