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Despite Inflation and Market Changes, Consumer Credit Remains Strong in Q1 2022

Understanding the Consumer Dynamics of Auto Refinance

Most pandemic financial programs have ended, interest rates are increasing, and rising inflation is driving concerns across the globe. But what does that mean for consumer spending power?

According to TransUnion’s just-released Q1 2022 Quarterly Credit Industry Insights Report (CIIR), consumer credit health is holding steady. Consumer spend is approaching pre-pandemic levels, and consumer liquidity also remains stable as credit holders are paying more than their required minimum payments. 

Quarter

Q1 2022

Q1 2021

Q1 2020

Q1 2019

Q1 2018

Average reported

aggregate excess payment per consumer

$328

$326

$318

$312

$307

“Compared to a year ago, the price of everything from filling a gas tank to buying a carton of eggs has increased due to inflation. However, there are several positives to note, including low unemployment, lenders increasing access to credit and strong consumer performance. These are all indications consumers are well-positioned as the economy continues to find its footing from the financial volatility of the pandemic.”

- Michele Raneri, Vice President of Research and Consulting at TransUnion.

 

Another positive sign

TransUnion’s Credit Industry Indicator (CII) increased to 116 in Q1 2022, up from 115 in Q4 2021 and 105 from one year ago. The CII offers a robust view of consumer credit health through aggregated credit data, including supply, demand, usage and performance, to show the overall picture of whether the credit market is improving or deteriorating. It also provides perspective on the impact of economic market events (including inflation) on consumers.

 

So far in 2022, consumer credit health has remained healthy, and we haven’t seen a material impact to consumer performance. Serious delinquency rates across mortgage, auto, credit card and personal loans have stayed flat despite expired forbearance programs and rolled back accommodation programs.

For more information about the report, please register for the Q1 2022 Quarterly Credit Industry Insights Report Webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.
 

Consumer credit trends in the credit card sector: Q1 2022

The credit card industry is rebounding; for the third consecutive quarter, card origination volumes set a record. Consumer demand has led to a record 197 million consumers with access to credit cards, with 159 million of those consumers carrying a balance:

  • 21.5 million new originations in Q4 2021, representing a 7% QoQ and 38% YoY increase
  • The subprime risk tier is driving the surge, growing 57.5%; near prime growing 39.8% YoY; and all other risk tiers exhibiting double-digit growth at lower percentages
  • Credit lines have also rebounded strongly — total credit lines exceeding $4 trillion and the average new account credit line growing 21.6% YoY to $4,634

Our view: Card issuers continue to meet consumer demand for credit by offering larger origination volumes and extending higher credit lines. Still, the average credit line remains below pre-pandemic levels as lenders continue to manage risk for origination growth in the below prime risk segments. Despite the rising price of goods and services, growth among consumer balances remains muted.
 

Q1 2022 credit card trend

Credit Card Lending Metric Q1 2022 Q1 2021 Q1 2020 Q1 2019
Number of Credit Cards 492.5 million 456.7 million 459.6 million 434.9 million
Borrower-Level Delinquency Rate (90+ DPD) 1.61% 1.27% 1.98% 1.89%
Average Debt Per Borrower $5,010 $4,784 $5,637 $5,545
Prior Quarter Originations* 15.5 million 18.9 million 16.5 million 21.5 million
Average New Account Credit Lines* $4,634 $3,811 $5,135 $5,313

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


Consumer credit trends in the auto sector: Q1 2022

Continuing the trend from late 2021, tight dealer inventory is being further impacted by international supply chain issues, the war in Ukraine, and COVID 19 lockdowns in China, eroding vehicle affordability and softening vehicle sales:

  • Origination volumes in Q4 2021 dropped -3.0% to 6.5 million from the same period last year
  • The average balance of new auto loans reached $28,415 in Q1 2022, a YoY increase of 15.2%
  • The average monthly payment of vehicle purchases (including both new and used) rose to $556, an increase of approximately $100 over a four-year period

Our view: Supply shortages have driven up vehicle prices, and the shutdown of international factories will lead to a growing lack of inventory throughout the remainder of the year. On top of increasing vehicle prices, rising inflation will also have an impact on consumer purchasing power. To help keep monthly payments in check, we anticipate lenders may offer consumers options like lengthened loan terms to offset affordability challenges.

Q1 2022 auto loan trends 

Auto Lending Metric

Q1 2022

Q1 2021

Q1 2020

Q1 2019

Number of Auto Loans 81.5 million 83.3 million 83.8 million 82.2 million

Borrower-Level Delinquency Rate (60+ DPD)

1.63% 1.52% 1.37% 1.32%
Prior Quarter Originations*

6.5 million

6.7 million

6.9 million

6.7 million

Average Monthly Payment**

$556

$492

$465

$458

Average Balance 

of New Auto Loans*

$28,415 $24,664 $22,752 $22,117
Average Debt Per Borrower  $21,517 $19,980 $19,256 $18,826

*Note: Originations are viewed one quarter in arrears to account for reporting lag.
**Data from S&P Global MobilityAutoCreditInsight, viewed one quarter in arrears.

Click here for additional auto industry metrics.
 

Consumer credit trends in the personal loan sector: Q1 2022

Lenders have expanded back into the non-prime segment with Q4 origination risk-tier distribution closely resembling pre-pandemic levels. As inflation drives consumers to seek credit to finance purchases or consolidate, we’re likely to see continued growth across risk tiers:

  • Total balances reached a milestone high of $178 billion in Q1 2022, growing 23.8% YoY, the fastest rate of growth since Q2 2016
  • The average balance per consumer, which reached $9,896 in Q1 2022, grew 12.2% YoY
  • The number of consumers carrying a balance also grew for the third consecutive quarter (20.4 million) in Q1 2022, just below the peak of 20.9 million consumers in Q1 2020
  • Delinquency rates remain at healthy levels and are below pre-pandemic highs
  • Serious delinquency rate (60+DPD) at the borrower level saw an uptick in Q1 2022, increasing from 2.68% to 3.25% YoY

Our view: Rising interest rates and uncertainty about the economy could dampen some of this growth. Additionally, a growing share of balances held by below prime consumers is driving an uptick in delinquency rates. Lenders will need to monitor performance of subprime and near prime consumers across their portfolios for signs of deterioration as they continue to lend in this segment.
 

Q1 2022 unsecured personal loan trends 

Personal Loan Metric Q1 2022 Q1 2021 Q1 2020 Q1 2019
Total Balances $178 billion $144 billion $159 billion $139 billion
Number of Unsecured Personal Loans 23.9 million 20.8 million 23.5 million 21.4 million
Number of Consumers with Unsecured Personal Loans 20.4 million 19.0 million 20.9 million 19.3 million
Account-Level Delinquency Rate (90+ DPD) 2.01% 1.76% 2.35% 2.48%
Borrower-Level Delinquency Rate (60+ DPD) 3.25% 2.68% 3.41% 3.50%
Average Debt Per Borrower $9,896 $8,817 $8,820 $8,363
Prior Quarter Originations* 5.7 million 4.2 million 5.2 million 5.0 million
Average Balance of New Unsecured Personal Loans* $6,656 $5,155 $5,548 $5,332

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

Consumer credit trends in the mortgage sector: Q1 2022

While rising interest rates and limited housing supply have caused a slowdown in mortgage originations, homeowners are tapping the equity they’ve built in their homes, and home equity loans reached an all-time high of approximately $20 trillion in Q4 2021, up 4% YoY:

  • Mortgage originations declined to 2.9 million originations in Q4 2021, a -28% YoY decrease but still well above the 2.3 million observed pre-pandemic in Q4 2019
  • Rate and term refinance originations dropped dramatically by 58% YoY
  • Purchase share of originations increased for the third consecutive quarter, up from 47% in Q4 2020 to 56% in Q4 2021
  • Cash-out refinance decreased by only 6% YoY, while HELOC grew 31% YoY in Q4 2021 and 13% YoY
  • The average loan size of new mortgages grew to $315,543, an increase of 7% YoY

Our view: Right now, there’s less incentive to go through a rate and term refinance, and for those looking to purchase a home, low inventory and high home prices present a challenge. For lenders, the substantial increase in HELOC and home equity loan origination presents tremendous opportunity if they can identify and reach consumers in the market to tap their available home equity.

 

Q1 2022 mortgage trends 

Mortgage Lending Metric Q1 2022 Q1 2021 Q1 2020 Q1 2019
Number of Mortgage Loans 51.5 million 50.9 million 50.7 million 49.8 million
Account-Level Delinquency Rate (90+ DPD) 0.63% 0.74% 1.03% 1.05%
Prior Quarter Originations* 2.9 million 4.0 million 2.3 million 1.4 million
Mortgage Origination* Distribution – Purchase  56% 47% 57% 78%
Mortgage Origination* Distribution –  Refinance 44% 53% 43% 22%
Average Balance of New Mortgage Loans* $315,543 $294,411 $292,754 $250,002
Number of HELOC Originations* 278,230 212,303 275,854 276,561
Number of Home Equity Loan Originations* 201,381 177,911 181,598 169,315

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

Click here for additional mortgage industry metrics. 


For more information about the report, please register for the Q1 2022 Credit Industry Insight Report webinar.

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