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Consumer Credit Origination, Balance and Delinquency Trends: Q4 2020

Matt Komos
Blog Post03/05/2021
Business Research
Consumer Credit Origination, Balance and Delinquency Trends: Q4 2020

As covered in our just-released Q4 2020 Industry Insights Report, the fourth quarter brought promising news for the consumer credit industry. Overall, consumer credit balance and origination activity picked up, while serious delinquency levels remained near record lows.

Mortgage originations — still benefiting from low interest rates and high demand — jumped 67% year-over-year, and auto loans have nearly recovered to Q3 2019 levels. Consumers with access to credit hit another all-time high at 187.1 million, and personal loan originations grew strongly quarter-over-quarter, indicating a gradual ramp up in volume.

Still, a big story is the lag in originations to subprime borrowers across all markets — most notably in auto which saw a 21% dip in originations to subprime borrowers. A combination of low consumer demand and tightening of lending criteria is likely driving the trend — which will remain one to watch in coming months.

Originations activity coming off early 2020 lows

Timeframe Originations in millions Auto loans (Overall/subprime) Credit cards (Overall/subprime) Personal loans (Overall/subprime) Mortgages (Overall)*
Q3 2020 7.32 (0.86) 12.28 (2.80) 3.50 (1.24) 3.85
Q2 2020 6.46 (0.77) 8.59 (1.84) 2.60 (0.89) 3.31
Q1 2020 6.34 (0.88) 15.52 (2.53) 3.90 (1.19) 2.19
Q4 2019 6.88 (0.95) 18.90 (3.71) 5.23 (1.91) 2.34
Q3 2019 7.45 (1.09) 18.65 (3.94) 5.05 (2.34) 2.31

*Subprime mortgage originations activity is not included as such loan activity is extremely low. 

A note of cautious optimism is necessary because although trends are promising, says Matt Komos, VP of Research and Consulting at TransUnion, “With the recent extension of mortgage forbearance programs, it’ll likely be beyond the initial March to May timeframe before we see the true impact of those programs for both consumers and the credit marketplace.”

For more information about the report, please register for the TransUnion Q4 2020 IIR webinar. And read on for more for more specific insights about auto loans, credit cards, mortgages and personal loans. 

Consumer credit trends in the credit card sector: Q4 2020

Overall, consumers are steering clear of using their credit cards as balances continue to drop. However, consumers with access to credit did hit another all-time high at 187.1 million at the end of 2020.

Findings from the report:

  • Q4 marked a second quarter of significant year-over-year declines in originations which were down 34.1%
  • Total balances declined for the third straight quarter (-12.7% year-over-year), while consumer-level balances were down for the fifth straight quarter (-9.6%)
  • Consumer-level delinquencies fell to 1.29% year-over-year; the second lowest level in five years
  • Serious delinquency rates are now down 89 basis points from the 10-year peak of 2.18% observed in Q4 2019
  • Of credit card accounts, 2.4% are still in some form of accommodation

What’s driving these changes? While credit card balances and originations are still well below pre-pandemic levels, we’re beginning to see stabilization of balances and rising delinquency compared to the lows observed earlier in 2020. With 2.4% of credit card accounts still in some form of accommodation, we expect delinquency rates to grow in the coming months.

Q4 2020 credit card trends 

Credit card lending metric Q4 2020 Q4 2019 Q4 2018 Q4 2017
Number of credit cards 452.8 million 454.7 million 429.9 million 418.6 million
Borrower-level delinquency rate (90+ DPD) 1.29% 2.18% 1.94% 1.87%
Average debt per borrower $5,111 $5,835 $5,736 $5,644
Prior quarter originations* 12.3 million 18.7 million 16.4 million 16.3 million
Average new account credit lines* $3,722 $5,214 $5,247 $5,194

Consumer credit trends in the auto sector: Q4 2020

The auto lending market is showing signs of recovery after bottoming out in Q2 when COVID-19 lockdowns were most severe.

Findings from the report:

  • Origination activity for Q3 improved on a quarterly basis
  • Balances continued to grow on a year-over-year basis, rising 3.5% to $1.33 trillion
  • The borrower-level 60-day delinquency rate rose to 1.57% in Q4 2020 from 1.50% the previous year
  • Subprime borrower performance continued to lag other credit risk tiers

What’s driving these changes? The auto marketplace is unique in that origination activity may be the result of a lack of demand rather than a lack of supply. As accounts come out of accommodation programs in the coming months, we’ll gain a clearer picture of the recovery, specifically regarding trends around subprime borrowers.

Q4 2020 auto loan trends 

Auto lending metric Q4 2020 Q4 2019 Q4 2018 Q4 2017
Number of auto loans 83.5 million 83.8 million 82 million 79.4 million
Borrower-level delinquency rate (60+ DPD) 1.57% 1.50% 1.44% 1.43%
Average debt per borrower $19,818 $19,202 $18,858 $18,597
Prior quarter originations* 7.3 million 7.5 million 7.2 million 7.1 million
Average balance of new auto loans* $23,727 $22,232 $21,520 $20,909

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

Consumer credit trends in personal loans: Q4 2020

Following sharp declines in originations in Q2 and Q3, unsecured personal loan lenders continued to be cautious through Q4; however, originations did see strong growth quarter-over-quarter.

Findings from the report:

  • Serious delinquency rates increased slightly by 15 basis points in Q4 2020 on a quarterly basis, though remained 78 basis points lower than Q4 2019
  • The total balance of personal loans fell again to $148 billion in Q4 of 2020, down from $161 billion in Q4 of 2019
  • Consumers with balances dropped 7.3% to $19.2 million
  • Continued availability of lender hardship programs, eviction moratoriums and decreased consumer spending helped keep delinquencies and new charge-off balances low

What’s driving these changes? Another stimulus package, the potential for additional payments, and the extension of federal unemployment benefits should help keep delinquencies and charge-offs at low levels in the near term. However, lockdowns, consumers saving more and low credit card balances may continue to slow demand for debt consolidation loans and impact originations. The end of lender forbearance programs, particularly mortgage, could impact delinquency rates and later drive demand for credit as liquidity sources dry up.

Q4 2020 unsecured personal loan trends 

Personal loan metric Q4 2020 Q4 2019 Q4 2018 Q4 2017
Total balances $148 billion $161 billion $138 billion $117 billion
Number of unsecured personal loans 21.2 million 23.3 million 21.1 million 18.2 million
Number of consumers with unsecured personal loans 19.2 million 20.8 million 19.1 million 16.9 million
Borrower-level delinquency rate (60+ DPD) 2.68% 3.46% 3.63% 3.29%
Average debt per borrower $8,995 $8,994 $8,402 $8,083
Prior quarter originations* 3.5 million 5.1 million 4.6 million 3.8 million
Average balance of new unsecured personal loans* $5,816 $6,276 $6,217 $6,218

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

Consumer credit trends in the mortgage sector: Q4 2020

A definite bright spot for 2020, mortgage originations continued to surge in Q3, reaching nearly 4 million loans, the highest level of originations since the Great Recession — and a 67% spike year-over-year.

Findings from the report:

  • The relatively even split — 52% for refinancing loans and 48% for new purchases — differs from the same time last year when a third of origination activity came from refis and two-thirds from purchases
  • New mortgages volumes grew the most at 118% year-over-year for lower risk consumers (those with a VantageScore of 760+)
  • Total new origination loan amounts reached $1.1 trillion as of Q3 2020, up 79% from Q3 2019
  • Median origination balances rose 6% on an annual basis to $255K in Q3 2020 
  • The overall 90+ consumer-level delinquency rate* dropped in Q4 2020 to 0.83%, down from 1.16% in Q4 2019 

What’s driving these changes? The mortgage industry continued to see strong performance as serious delinquencies remained low and balances and originations grew at a brisk pace, with much of the growth attributed to lower risk consumers and refis. As forbearance plans expire at the end of Q1 and into Q2 2021, we anticipate a rise in delinquency levels.

Q4 2020 mortgage trends 

Mortgage lending metric Q4 2020 Q4 2019 Q4 2018 Q4 2017
Number of mortgage loans 50.5 million 50.1 million 49.4 million 49.6 million
Account-level delinquency rate (90+ DPD) 0.83% 1.16% 1.30% 1.53%
Prior quarter originations* 3.9 million 2.3 million 1.6 million 1.7 million
Average debt per borrower $296,505 $286,912 $252,600 $249,273
Borrower-level delinquency rate (90+ DPD) 0.70% 1% 1.1% 1.27%
Average debt per borrower $220,244 $212,040 $206,922 $201,737

**Note:Delinquency rates are based on data reported to TransUnion.

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

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