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Consumer Credit Origination, Balance and Delinquency Trends: Q3 2019

Matt Komos
Blog Post11/25/2019
Business Research
Consumer Credit Origination, Balance and Delinquency Trends: Q3 2019

Armed with credit cards, consumers will be ready to shop this holiday season, according to new data from TransUnion. But how will other sectors in the consumer credit market fare?

Find all the details on the state of credit cards and personal, auto and mortgage loans in the just-released Q3 2019 Industry Insights Report. Here are some highlights:

Consumer credit trends in the credit card sector: Q3 2019

Private label and bank-issued card balance activity and originations have been consistently higher during recent holiday shopping seasons, and that trend will likely continue this year. The number of consumers with access to revolving credit has reached a record high of 200.5 million consumers as of Q3 2019 — and their balances are growing. Findings from the report:

  • Private label card originations increased 2.4% to 12.4 million last quarter, marking the first such year-over-year increase in 11 quarters.
  • The number of new bank-issued credit cards also rose last quarter, increasing 5.2% to 16.6 million, the fifth straight quarter of yearly growth.
  • Bank-issued credit card average balances per consumer have increased to $5,668, while private label card balances grew to $2,022 in this timeframe.
  • Consumers have been consistently charging up their credit cards during the last three holiday seasons, but they’ve been paying them down at higher rates. In the 2018 holiday shopping season, 92% of the $31.9 billion in bankcard balance growth was paid down in the first quarter of 2019.

 

What’s driving these changes?

The growth in credit card originations is largely being driven by higher credit quality borrowers (prime and above), who are opening more new accounts than non-prime borrowers. Additionally, to pay off credit balances in 2018, consumers took advantage of newer products, such as point-of-sale financing, to pay off their debts. That is expected to continue.

Charging up credit cards in November and December; paying them down in the New Year

Year Q4 Bankcard Balance Growth Percent of Bankcard Debt Paid Down in the Following Quarter (Q1) Q4 Private Label Balance Growth Percent of Private Label Debt Paid Down in the Following Quarter (Q1)
2018/2019 $31.9 billion 92% $6.6 billion 102%
2017/2018 $32.6 billion 84% $6.3 billion 94%
2016/2017 $3.3 billion 72% $8.5 billion 30%

Consumer credit trends in the auto loans sector: Q3 2019

Originations have flattened through the first half of 2019, while balances continued to grow at a slower rate. Findings from the report:

  • Total outstanding balances remain growing at 3.52% year-over-year. Average balances per consumer reached $19,145, or a 1.64% year-over-year increase, which is consistent with the past three years of growth.
  • Serious borrower delinquency rates (60+ DPD) are stable at 1.4%, as auto remains one of the best performing debt classes in the consumer wallet.

What’s driving these changes?

An increase in prices, rising APRs and plateauing term growth are slowing both the new and used vehicle markets. Those who are buying are opting for used vehicles, and the used vehicle market is now nearly three times larger than new car sales.

Consumer credit trends in the mortgage and HELOC sectors: Q3 2019

Mortgage originations turned sharply positive last quarter, but while home equity levels are at all-time highs, HELOC originations continue to fall.

  • Mortgage origination volumes jumped 11.66% year-over-year.
  • The average 30-year fixed rate peaked at 4.87% in November 2018 and fell to 3.8% by June 2019.
  • High-cost MSAs showed the largest increases in origination growth, with overall new account balances increasing 10.03% year-over-year.
  • Consumer-level serious delinquencies on mortgages (60+ DPD) remain at historic lows.
  • The HELOC market saw a 4.51% decline last quarter, marking six straight quarters of year-over-year declines.
  • HELOC balances also declined 5.31% in Q3 2019, even as lenders tried to encourage growth by increasing credit lines (1.35% year-over-year).

What’s driving these changes?

Declining interest rates are giving homeowners incentive to refinance, especially homeowners of expensive properties.

While strong home price appreciation has created record amounts of equity, consumers aren’t willing to leverage it through HELOCs. Instead, they’re opting for other products, such as personal installment loans through FinTechs and point-of-sale lenders.

Personal loans: Q3 2019

Lenders in the personal unsecured space have seen a spike in originations and balance growth over the past several years, as consumers across all risk tiers choose products from FinTech and point-of-sale lenders over traditional lenders.

  • Last quarter originations held steady for a year-over-year increase of 8.16% extending the positive year-over-year growth for the 10th straight quarter.
  • Both origination volume and balance growth has largely been driven by new loans to prime and above consumers at much larger amounts.
  • Average new loan amounts to super prime consumers was $13,266 versus just $2,390 for subprime borrowers in Q3 2019.
  • Seriously delinquent consumers (60+ DPD) remains near recent lows at 3.28%

What’s driving these changes?

Consumers increasingly value the accessibility and ease of working with non-traditional lenders. That trend is expected to continue into 2020 and beyond.

We continue to monitor the credit market for any changes. Financial institutions can use these consumer credit trends in originations, balances and delinquencies to guide their strategies. To hear more about these trends, register for our TransUnion Q3 2019 and 2020 Forecast Consumer Credit webinar.

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