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Consumer Credit Origination, Balance and Delinquency Trends: Q1 2020

Matt Komos
Blog Post06/05/2020
Business Research
Consumer Credit Origination, Balance and Delinquency Trends: Q1 2020

Heading into 2020, all four credit sectors were looking strong and poised for growth. Then the COVID-19 health crisis hit. It’s still too early to tell just how significantly credit markets will be impacted. After all, the World Health Organization declared the outbreak a pandemic in mid-March, and a combination of federal stimulus packages, tax returns, unemployment benefits and forbearance programs are likely distorting the true picture — at least for now. 

Taking a closer look at April data

To gain greater insight into consumers’ payment behaviors during the first two months of the COVID-19 pandemic, TransUnion supplemented its quarterly Q1 2020 Industry Insights Report with a our new Monthly Industry Snapshot report that covered consumer credit market for the month of April. Key findings from that data include:

  • The percentage of accounts entering “financial hardship” status, which includes factors like deferred payment, frozen account or past due payment, has risen dramatically for credit products, such as auto loans, credit cards, mortgages and personal loans
  • Despite growing financial hardship, consumers are deleveraging credit card balances, with the average balance per consumer decreasing from $5,893 to $5,369 between March and April
  • In the personal loan market, the aggregate excess payment (AEP) from consumers between March and April increased from $194 to $215

Monthly Industry Snapshot of Consumer Performance by Credit Product

Timeframe Auto Credit Card Mortgage Personal Loans
Percentage of Accounts in Hardship
April 2020 3.54% 3.22% 5.00% 3.58%
March 2020 0.64% 2.15% 0.48% 1.56%
April 2019 0.51% 0.03% 0.48% 0.30%
Percentage of Borrowers 60+ DPD
April 2020 1.33% 1.87% 1.27% 3.27%
March 2020 1.37% 1.96% 1.40% 3.40%
April 2019 1.11% 1.78% 1.32% 3.35%

*Credit card deliquency rate reported as 90+DPD per industry standard

Our view: The positive trend of paying down balances is one to watch. For now, forbearance and deferment programs could be offering consumers payment flexibility and enabling them to determine which credit products to pay down first, but those options will eventually go away. Consumers may be paying down balances now to increase liquidity later. Or, it could just be the circumstances: Consumers are spending less because of reduced work hours and stay-at-home orders, but they’re still paying their bills, so balances are dropping.

Evaluating the quarter as a whole

To hear all the Q1 data relating to the state of personal, auto and mortgage loans, view our Q1 2020 consumer credit trends webinar. Here are the highlights.

Consumer Credit Trends in the Credit Card Sector: Q1 2020

Following seven consecutive quarters of origination growth, Q4 2019 was another record-setting quarter for originations with a growth rate of 14.9% year over year. That growth continued into the first quarter of 2020. Findings from the study include:

  • 7 million consumers now have access to a credit card
  • There are 457.6 million credit cards in the US, up nearly 25 million from one year ago
  • Average credit card debt per borrower rose to $5,653
  • Consumer delinquency continued to increase to 1.97%, the highest level since 2011

Q1 2020 Credit Card Trends

Credit Card Lending Metric Q1 2020 Q1 2019 Q1 2018 Q1 2017
Number of Credit Cards 457.6 million 432.8 million 416.5 million 405.8 million
Borrower-Level Deliquency Rate (90+DPD) 1.97% 1.89% 1.78% 1.69%
Average Debt Per Borrower $5,653 $5,554 $5,472 $5,332
Prior Quarter Originations* 18.9 million 16.5 million 16.0 million 16.0 million
Average New Account Credit Lines* $5,128 $5,296 $5,283 $5,262

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

Our view: At the start of 2020, the industry was poised for another strong quarter as the US saw record growth in originations and consumer access to credit. However, it’s likely the credit card sector has not yet seen the true economic impact of the COVID-19 pandemic. So far, delinquencies have remained relatively stable, possibly due to accounts moving into deferment because of COVID-19 legislation.

Consumer Credit Trends in the Auto Sector: Q1 2020

Last quarter, the auto market exhibited strong year-over-year origination growth and steady delinquencies. Despite ongoing concerns about affordability, originations grew 3.1% year over year in Q4 2019 compared to 1.7% in Q4 2018. However, all signs indicate the auto industry will face challenges in the coming months. Findings from the study include:

  • The average new account balance continued to grow and reached an average of $22,764 per consumer, a 2.9% year-over-year increase
  • The average amount financed continued to rise, but the average monthly payment grew at a slower rate due to lengthening loan terms and a recent decline in APR
  • APRs experienced their first year-over-year decline in Q4 2019 after 10 consecutive quarters of growth
  • Delinquencies remained stable in Q1 2020 at 1.37% 60+ DPD, a slight uptick over the same period last year and within a delinquency variation of 10 basis points for 11 straight quarters

Q1 2020 Auto Loan Trends

Auto Lending Metric Q1 2020 Q1 2019 Q1 2018 Q1 2017
Number of Auto Loans 83.8 million 82.2 million 79.7 million 76.4 million
Borrower-Level Deliquency Rate (90+DPD) 1.37% 1.31% 1.32% 1.30%
Average Debt Per Borrower $19,302 $18,845 $18,581 $18,286
Prior Quarter Originations* 6.9 million 6.7 million 6.6 million 6.7 million
Average Balance of New Auto Loans* $22,764 $22,128 $21,678 $21,071

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

Our view: High unemployment rates and low consumer confidence brought on by COVID-19 will exacerbate affordability challenges and impact growth. To counter the impact of pandemic-related restrictions, many dealers will be forced to transition away from brick-and-mortar operations and begin to offer more digital auto shopping and buying experiences.

Consumer Credit Trends in Mortgages: Q1 2020

Leading up to 2020, the mortgage industry experienced significant origination growth, primarily due to refinancing in Q4 2019. In fact, volumes reached the highest level in 10 years with 2.5 million originations, a growth rate of 63% year-over-year, and nearly 1 million more originations than the same period last year. However, the industry is starting to feel the impact of COVID-19 forbearance programs. Findings from the study include:

  • Serious delinquency rates declined in Q1 2020 to 1.40%, down four basis points from the same period last year, reversing the delinquency uptick from the past few quarters
  • Five percent of all mortgages are currently in forbearance as of April 2020, according to the TransUnion credit database, which prevents consumers from being labeled as “delinquent”
  • Forbearance programs kept delinquency rates at manageable levels in Q1 and is expected to do the same into Q2

Q1 2020 Mortgage Loan Trends

Mortgage Lending Metric Q1 2020 Q1 2019 Q1 2018 Q1 2017
Number of Mortgage Loans 53.9 million 53.1 million 53.1 million 52.8 million
Borrower-Level Deliquency Rate (90+DPD) 1.40% 1.44% 1.74% 2.07%
Average Debt Per Borrower $213,994 $208,057 $202,470 $196,772
Prior Quarter Originations* 2.5 million 1.5 million 1.8 million 2.1 million
Average Balance of New Auto Loans* $268,908 $224,100 $229,538 $235,361

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

Our view: Historically low interest rates over the past few years have helped drive high origination volumes, even has home prices have climbed. Consumers in high-priced areas will have greater incentive to refinance, and those volumes will likely continue as interest rates remain low. Expect consumers to continue to take advantage of mortgage forbearance programs, which will keep delinquency levels low in the near-term.

Consumer Credit Trends in the Personal Loan Sector: Q1 2020

Total personal loan balances reached a high of $162 billion. However, balance growth in the personal loan industry slowed toward the end of Q1 2020 as lenders started to pull back late in the quarter. Findings from the study include:

  • The average new account balance secured by consumers has largely remained stable year over year
  • After increasing 4.7% year over year in Q4 2019, origination growth in the personal loan market hit its slowest rate of growth in 10 straight quarters
  • Delinquencies have largely remained stable over the past few years

Q1 2020 Unsecured Personal Loan Trends

Personal Loan Metric Q1 2020 Q1 2019 Q1 2018 Q1 2017
Total Balances 162 billion 143 billion 120 billion 102 billion
Number of Unsecured Personal Loans 23.4 million 21.4 million 19.2 million 16.9 million
Number of Consumers with Unsecured Personal Loans 20.9 million 19.3 million 17.6 million 15.7 million
Borrower-Level Deliquency Rate (90+DPD) 3.39% 3.47% 3.51% 3.72%
Average Debt Per Borrower $9,025 $8,618 $7,986 $7,603
Prior Quarter Originations* 5.2 million 4.9 million 4.6 million 3.7 million
Average Balance of New Unsecured Personal Loans* $5,619 $5,432 $5,044 $5,132

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

Our view: While demand for personal loans remains high, late in the quarter, lenders began instituting stricter underwriting guidelines and reducing prescreen campaigns to limit their exposure during a downturn. The COVID-19 crisis will likely trigger a decline in originations and an uptick in delinquencies over the next few quarters; however, forbearance programs will temper the severity of the impact, at least in the near term.  

To receive more insights on consumer credit trends, watch the TransUnion’s Q1 2020 Industry Insights Report webinar on-demand.

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