Consumer Credit Origination, Balance & Delinquency Trends: Q3 2017

Matt Komos
Blog Post11/17/2017

Nearly 196 million consumers had access to revolving loans, such as bank-issued and private label credit cards, in the third quarter of 2017. According to TransUnion’s Industry Insights Report, powered by PramaSM analytics, this is the highest level of revolving credit access since TransUnion began measuring the variable in 2009.

In a recent webinar, we explored this trend and the drivers of growth within the major lending products–auto, mortgage, card and personal loans.

Let’s dive deeper into the data to explore the health of consumers in the credit marketplace.

Consumer Credit Trends in the Auto Sector: Q3 2017

Slowing originations and rising delinquency rates could signal a potential plateau in the auto sector. Here are three trends we observed about auto loans:

  1. Overall auto loan balances rose 5.9% between Q3 2016 and Q3 2017, marking the lowest year-over-year growth rate since Q3 2012.
  2. Serious auto loan delinquency rates were 1.40% in Q3 2017, the highest level observed since Q3 2009 and a seven basis point increase from Q3 2016.
  3. For the fourth consecutive quarter, auto loan originations* decreased on a year-over-year basis, declining 2.2% between Q2 2016 and Q2 2017.

What is driving these changes in the auto loan market?

We’re observing a recent uptick in delinquencies, driven primarily by non-prime origination growth as underwriting standards ‘relaxed’ in recent years. Though serious auto loan delinquency rates are slowly rising, we still do not believe this is a cause for concern.

In the second quarter, originations* declined due to the tightening of underwriting requirements and the slowing demand for new vehicles. While the prime and below risk tiers had a 5.9% drop in originations, consumers in prime plus and super prime risk tiers originated auto loans and leases at a higher rate, offsetting some of the decline.

Consumer Credit Trends in the Credit Card Sector: Q3 2017

Slowing credit card originations signal potential saturation in the lower-risk credit tiers. Here are three key findings about credit cards from the Q3 2017 Industry Insights Report:

  1. Total credit card balances continued to grow on an annual basis, rising 7% to $731 billion in Q3 2017 from $683 billion in Q3 2016.
  2. The number of overall new credit card accounts* decreased 12.1% between Q2 2016 and Q2 2017.
  3. While serious delinquency rates increased to 1.68% in Q3 2017 from 1.53% in Q3 2016, they remain relatively low on a historical basis.

What is driving these changes in the credit card market?

In 2016, we observed new account growth for credit cards, and the robust increase in card balances indicates consumers who have access to new cards are clearly using them and building balances.

Not surprisingly, subprime consumers experienced the largest annual increase in serious delinquency rates, though we also observed new account balance declines in this group as well.

Consumer Credit Trends in the Mortgage Sector: Q3 2017

Equity continues to grow while mortgage origination growth slows. Here are three changes in the mortgage market in Q3 2017:

  1. The serious mortgage delinquency rate declined approximately 16% on an annual basis to 1.91% at the end of Q3 2017.
  2. The total number of outstanding mortgages increased to 52.7 million, continuing the previous quarter’s annual growth and reversing a prior trend of yearly declines that had lasted since Q4 2014.
  3. Average new account balances* declined by 2.4% in the last year to $224,502.

What is driving these changes in the mortgage market?

Year-over-year mortgage delinquency rates have consistently dropped each quarter since Q3 2010, now reaching the lowest point since the recession. We did note that the shape of the delinquency trendline has been flat during the second and third quarters of 2017, suggesting that a natural floor for delinquencies might be forming. However, a similar period of flat delinquencies occurred between the second and fourth quarters of 2016, before they once again began to decline.

A higher interest rate environment and market saturation have negatively affected refinance market share, and we anticipate it to decline even further.

Consumer Credit Trends in the Personal Loan Sector: Q3 2017

Growth in personal loan originations signals possible evidence of a rebound. Here are trends in the personal loan market from the Q3 2017 Industry Insights Report:

  1. Personal loan balances reached their all-time high in Q3 2017, rising $5 billion to close the quarter at $112 billion.
  2. For the first time since Q1 2016, prime and above originations* increased by double-digit percentages between Q2 2016 and Q2 2017.
  3. Serious delinquency rates in Q3 2017 declined to 3.13%, a marked improvement from recent third quarters.

What is driving these changes in the personal loan market?

Slowing originations and rising delinquency rates could signal a potential plateau in the auto sector. Here are three trends we observed about auto loans:

  1. Overall auto loan balances rose 5.9% between Q3 2016 and Q3 2017, marking the lowest year-over-year growth rate since Q3 2012.
  2. Serious auto loan delinquency rates were 1.40% in Q3 2017, the highest level observed since Q3 2009 and a seven basis point increase from Q3 2016.
  3. For the fourth consecutive quarter, auto loan originations* decreased on a year-over-year basis, declining 2.2% between Q2 2016 and Q2 2017.

To hear more about these trends,  view our TransUnion Q3 2017 Industry Insights Webinar

*Originations and new account balances are viewed one quarter in arrears to account for reporting lag.

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