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Consumer Credit Origination, Balance and Delinquency Trends: Q4 2019

Matt Komos
Blog Post03/04/2020
Business Research
Consumer Credit Origination, Balance and Delinquency Trends: Q4 2019

Mortgage refinance is surging, auto and personal loans are up, and growth in credit cards just brought credit access to an all-time high. The end of 2019 brought some optimistic news across all four credit sectors, according to TransUnion’s newly released Q4 2019 Industry Insights Report.

For much more analysis, watch the TransUnion Q4 2019 IIR Webinar on demand, but keep reading for some important highlights.

Consumer Credit Trends in the Auto Sector: Q4 2019

Loan originations grew at their highest quarterly rate in four years, with the used vehicle market sparking the trend. Overall, performance has remained relatively strong, and delinquency rates continue to be well-managed, even as average auto balances rise.

Findings from the report:

  • Auto originations grew at a rate of 4.3% year-over-year in Q3 2019, adding 7.5 million new accounts.
  • The average new account balance grew to $22,232, a 3.3% uptick over the same period last year.
  • Trucks and SUVs grew to 71% of new financed vehicles and 60% of used financed vehicles in Q3 2019, compared to 68% and 57%, respectively, in Q3 2018[1].
  • The proportion of used financed vehicles vs. new is large and growing, with a 53%/47% used/new split in Q3 20191. 
  • New auto loan terms grew moderately to 69 months in Q3 2019 vs. 68 months a year earlier, which slowed monthly loan payment growth to 3.6% year-over-year, with an average monthly payment for new vehicle loans of $561 in Q3 2019, up from $542 in Q3 20181.
  • Loan terms have also lengthened for used vehicles, growing from 63 months in 2018 to 64 months in 2019, slowing the rate of growth for monthly loan payments to 3.0% year-over-year, bringing the average used monthly payment to $3891.
  • As loan amounts and terms have increased, average loan-to-value (LTV) at origination has inched up. Used LTV grew to 112.2 from 109.4 a year earlier, while new LTV grew to 100.0 from 99.6 a year earlier1.
  • The delinquency level (60+DPD) increased to 1.50% in Q4 2019, up from 1.44% in Q4 2018 and 1.43% in Q4 2017.

Q4 2019 Auto Loan Trends

Auto Lending Metric Q4 2019 Q4 2018 Q4 2017 Q4 2016
Number of Auto Loans 83.8 million 82.0 million 79.4 million 75.8 million
Borrower-Level Delinquency Rate (60+ DPD) 1.50% 1.44% 1.43% 1.44%
Average Debt per Borrower $19,202 $18,858 $18,597 $18,391
Prior Quarter Originations* 7.5 million 7.1 million 7.1 million 7.5 million
Average Balance of New Auto Loans* $22,232 $21,520 $20,909 $20,743

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

What’s driving these changes?

The uptick in account balances is largely due to consumers’ continued migration from cars to more expensive trucks and SUVs. The love of more expensive vehicles — and consumers’ determination to offset climbing costs — is also behind the rise in the used car market, as consumers across all risk tiers are choosing used vehicles to save money. Additionally, to reduce monthly payments, consumers are opting for longer terms, which have lengthened for both new and used automobiles.

Consumer Credit Trends in Mortgage Loans: Q4 2019

Originations are up, largely because mortgage refinancing has become popular again. Additionally, Generation Z has officially entered the market, but overwhelmingly Millennials and Gen Xers still account for most of the originations.

Findings from the report:

  • Mortgage originations increased 39% year-over-year to over 2.5 million originations in Q3 2019 — mostly driven by refi activity.
  • Generation Z experienced the highest year-over-year origination growth in Q3 2019 at 84%, followed by Millennials (43%) and Gen Xers (41%). Despite this growth, Generation Z makes up the smallest proportion of originations at 2%, with Millennials and Gen Xers accounting for 36% and 34% respectively.
  • Average new account balances grew 16.2% year-over-year from $227,376 in Q4 2018 to $264,319 in Q4 2019. Generation Z still had the lowest average new account balance at $151K, compared to Millennials at $264K and Gen Xers at $264K.
  • Overall mortgage delinquency (60+DPD) has declined year-over-year from 1.66% in Q4 2018 to 1.55% in Q4 2019; however, mortgage delinquencies have risen for two consecutive quarters, which has only happened twice since 2009.

Q4 2019 Mortgage Loan Trends

Mortgage Lending Metric Q4 2019 Q4 2018 Q4 2017 Q4 2016
Number of Mortgage Loans 53.6 million 52.8 million 53.2 million 52.0 million
Borrower-Level Delinquency Rate (60+ DPD) 1.55% 1.66% 1.86% 2.28%
Average Debt per Borrower $212,040 $206,922 $201,736 $194,415
Prior Quarter Originations* 2.5 million 1.8 million 1.9 million 2.2 million
Prior Quarter Average Balance of New Mortgage Loans* $264,319 $227,376 $228,563 $235,820

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

What’s driving these changes?

Consumers with higher mortgages, especially in areas with higher home prices, are refinancing to save on monthly payments. Our MSA-level analysis further supports the trend: Of the top 20 MSAs, those with traditionally higher home prices, such as San Diego, Los Angeles and San Francisco, had the largest year-over-year origination growth at 91%, 85% and 70%, respectively.

Consumer Credit Trends in the Personal Loan Sector: Q4 2019

Following a year of slowed growth in the consumer lending industry, the pace of personal loan originations picked up for the first time since 2018.

Findings from the report:

  • With a year-over-year growth rate of 9.7%, 5.1 million new loans were originated in Q3 2019, bringing the number of consumers carrying a personal loan to over 20 million.
  • Performance has remained stable as delinquencies (60+DPD) decreased to 3.46% from 3.63% between Q4 2018 and Q4 2019.
  • The average debt per borrower has continued a steady year-over-year trajectory with a slight uptick to $8,994 in Q4 2019.
  • Total balances climbed to 16.4% year-over-year to $161 billion.

Q4 2019 Unsecured Personal Loan Trends

Personal Loan Metric Q4 2019 Q4 2018 Q4 2017 Q4 2016
Total Balances $161 billion $138 billion $117 billion $102 billion
Number of Unsecured Personal Loans 23.2 million 21.1 million 18.2 million 16.9 million
Number of Consumers with Unsecured Personal Loans 20.8 million 19.1 million 16.9 million 15.8 million
Borrower-Level Delinquency Rate (60+DPD) 3.46% 3.63% 3.29% 3.83%
Average Debt per Borrower $8,994 $8,402 $8,083 $7,640
Prior Quarter Originations* 5.1 million 4.6 million 3.8 million 3.5 million
Average Balance of New Unsecured Personal Loans* $6,276 $6,217 $6,218 $5,443

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

What’s driving these changes?

Consumers have a growing affinity for personal loans, specifically those consumers in the above prime population. Overall the average account balance and performance has remained stable across risk tiers, demonstrating well-managed risk by lenders.

Consumer Credit Trends in the Credit Card Sector: Q4 2019

The credit card industry continues to grow, as a record 184 million consumers now have access to a credit card. Overall, the credit card market has continued to show healthy signs of growth as Q3 2019 hit a milestone in terms of origination growth with 18.6 million new accounts — the first quarter ever to reach above 18 million.

Findings from the report:

  • Total balances continued its growth trajectory for 27 consecutive quarters, growing 5.8% year-over-year from $801 billion to $847 billion in Q4 2019
  • Despite an expansion of credit, card issuers are prudently managing risk across their portfolios amid a more pronounced rise in delinquencies compared to recent years
  • The average new account credit line has largely remained stable, decreasing to $5,214 in Q4 2019 from $5,247 over the same period last year

Q4 2019 Credit Card Trends

Credit Card Lending Metric Q4 2019 Q4 2018 Q4 2017 Q4 2016
Number of Credit Cards 454.7 million 429.9 million 418.6 million 404.4 million
Borrower-Level Delinquency Rate (60+DPD) 2.18% 1.94% 1.87% 1.79%
Average Debt per Borrower $5,834 $5,736 $5,644 $5,486
Prior Quarter Originations* 18.6 million 16.4 million 16.3 million 17.5 million
Average New Account Credit Lines* $5,214 $5,247 $5,194 $5,373

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

What’s driving these changes?

Rising consumer demand combined with new credit products resulted in another healthy quarter of growth for the credit card industry. Both origination and balance growth have remained strong as consumers continue to access and use credit. We will monitor the delinquency rates closely, given the increase this past quarter. Credit card delinquencies usually rise in Q4 and decline in Q1, so the Q1 2020 credit card performance will give us more insight about what we can expect in coming months.

For more information, please watch the TransUnion Q4 2019 IIR Webinar on-demand.

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