08/21/2024
Blog
Consumers Tap Existing and New Credit in Q2 as Household Budgets Remain Tight
Many consumers continue to use credit products to compensate for financial shortcomings as incomes remain constricted due to high prices, according to the newly released Q2 2024 Quarterly Credit Industry Insights Report (CIIR) from TransUnion. Indeed, consumers are taking on more balances and credit products to get by month to month.
“Consumers across the board continue to engage with a wide range of credit products, with continued balance growth across credit risk tiers. In particular, super prime originated more this quarter in credit cards and auto,” said Michele Raneri, Vice President and Head of US Research and Consulting at TransUnion. “On the origination front, this doesn’t mean prime and below consumers don’t have access to new credit; however, they’re going to have to wait for lower interest rates for their monthly payments to come down.”
TransUnion will be watching closely to see how these numbers change if the Federal Reserve does lower interests rates as expected this fall.
To learn more about the latest consumer credit trends, register for the Q2 2024 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: Q2 2024
While total balances remained at $1.05T for the third consecutive quarter, balance growth slowed as bank card originations continued to decline. Other insights from the report include:
- Bankcard originations declined 7% YoY, marking the fourth consecutive quarter of YoY declines
- Super prime originations were up, while all other tiers were down, although subprime’s decline of 5% YoY was less marked than observed in previous quarters
- 19% of all originations were attributed to Gen Z (up 2% YoY); the only generation that saw a YoY increase in share
- Balances continued to grow at a lower rate as they increased just 8.6% YoY following a period of consistent, double-digit YoY percentage increases Borrower-level 90+ DPD increased by 20 bps YoY to 2.26% (the YoY increase between 2023 and 2024 was significantly less than the YoY increase between 2022 and 2023)
Our view: A more pronounced divergence is occurring when it comes to how consumer segments are using their credit cards. Prime and below segments seem to be experiencing more inflationary pressures and are relying on their cards more, leading to increased balances and higher utilization. Originations will likely continue to decline mid-tier as issuers look to less risky borrowers. We expect delinquency rates to continue to rise, but the growth rate should decelerate.
Q2 2024 credit card trends
Credit card lending metric (bankcard)
| Q2 2024
| Q2 2023
| Q2 2022
| Q2 2021
|
Number of credit cards (bankcards)
| 545.1 million
| 530.6 million
| 500.0 million
| 463.4 million
|
Borrower-level delinquency rate (90+ DPD)
| 2.26%
| 2.06%
| 1.57%
| 0.95%
|
Total credit card balances
| $1.05 Trillion
| $963
billion
| $820
billion
| $707
billion
|
Average debt per borrower
| $6,329
| $5,947
| $5,270
| $4,828
|
Number of consumers carrying a balance
| 170.1 million
| 167.2 million
| 161.6 million
| 152.9 million
|
Prior quarter originations*
| 17.7 million
| 19.0 million
| 18.9 million
| 14.8 million
|
Average new account credit lines*
| $6,204
| $5,972
| $5,035
| $3,974
|
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
For more credit card industry information, click here for episodes of Extra Credit: A Card and Banking Podcast by TransUnion. Click here for a Q2 2024 credit card infographic.
Consumer credit trends in the personal loan sector: Q2 2024
In the second quarter, balance growth slowed and bank card originations continued to decline. In Q1, after five consecutive quarters of YoY originations decline, unsecured personal loan originations were up 7% YoY to 4.6 million. Q2 2024 represented the 12th consecutive quarter of YoY growth in total balances. Other insights from the report include:
- For the seventh consecutive quarter, YoY balance growth was at a slower rate than the quarter before (with growth of 6% to $246 billion)
- Almost all risk tiers, except for prime plus, contributed to the growth in originations, led by super prime and near prime
- Total new account balances for Q1 2024 fell 10% YoY to $27 billion, while the average balance per consumer saw small growth of 1.2% YoY in Q2 2024
- Total consumers with a balance grew YoY for the 11th consecutive quarter, reaching 23.9 million
- Consumer-level 60+ DPD delinquencies fell to 3.4% in Q2 2024, led by subprime which saw a decline of nearly 7% YoY in Q2 2024
Our view: We’re seeing FinTech activity in the unsecured personal loan market return to levels seen in previous years. It’ll be worth watching to see if FinTechs (and other lenders) are positioning themselves to take advantage of potential Federal Reserve rate cuts later in 2024.
Personal loan metric
| Q2 2024
| Q2 2023
| Q2 2022
| Q2 2021
|
Total balances
| $246 billion
| $232 billion
| $192 billion
| $146 billion
|
Number of unsecured personal loans
| 28.8 million
| 27.2 million
| 24.9 million
| 20.7 million
|
Number of consumers with unsecured personal loans
| 23.9 million
| 22.7 million
| 21.0 million
| 18.7 million
|
Borrower-level delinquency rate (60+ DPD)
| 3.38%
| 3.62%
| 3.37%
| 2.28%
|
Average debt per borrower
| $11,687
| $11,548
| $10,344
| $9,079
|
Average account balance
| $8,557
| $8,558
| $7,705
| $7,072
|
Prior quarter originations*
| 4.6 million
| 4.3 million
| 5.0 million
| 3.2 million
|
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Click here for additional unsecured personal loan industry metrics. Click here for a Q2 2024 unsecured personal loan infographic.
Consumer credit trends in the mortgage sector: Q2 2024
In Q1, 2024 mortgage originations increased by 2% YoY to 915K, marking the first increase in originations since 2021. Other insights from the report include:
- Gen Z saw an increase in share of mortgage originations, up from 12.4% in Q1 2023 to 14.9% in Q1 2024, the only generation to see a share increase over the period
- Purchase originations fell 1% YoY but accounted for 84% of all originations in Q1 2024
- The Q2 2023 vintage is underperforming earlier vintages
- Home equity originations were down 4% YoY to 472K in Q1 2024
- HELOC originations fell 7% YoY to 234K in Q1 2024, marking the fifth consecutive quarter of YoY declines
- HELOAN originations fell 1% YoY to 237K in Q1 2024
- Delinquencies continued to trend upward with consumer level 60+ DPD delinquencies rising to 1.12% in Q2 2024, up from 0.89% in Q2 2023
- FHA loans maintained the majority share of delinquent accounts
Our view: After reaching two-decade highs in 2023, mortgage rates have moderated slightly over the first half of 2024, a likely factor in the modest originations gains. With a contracting monetary policy expected in the second half of 2024 due to easing inflationary pressures, mortgage rates are expected to decline further by the end of the year, which could further stimulate the mortgage market. Delinquencies continued to trend up in Q2, marking the ninth consecutive quarter of annual increases, and is a trend to continue to monitor in coming quarters.
Q2 2024 mortgage trends
Mortgage lending metric
| Q2 2024
| Q2 2023
| Q2 2022
| Q2 2021
|
Number of mortgage loans
| 53.4
million
| 52.5 million
| 51.8
million
| 51.1
million
|
Consumer-level delinquency rate (60+ DPD)
| 1.12%
| 0.89%
| 0.77%
| 0.70%
|
Prior quarter originations*
| 915K
| 899K
| 2.2 million
| 3.9 million
|
Average loan amounts
of new mortgage loans*
| $339,232
| $326,214
| $322,631
| $297,534
|
Average balance per consumer
| $261,389
| $253,838
| $246,091
| $229,534
|
Total balances of all mortgage loans
| $12.2 trillion
| $11.7 trillion
| $11.2 trillion
| $10.3 trillion
|
* Originations are viewed one quarter in arrears to account for reporting lag.
Click here for additional mortgage industry metrics. Click here for a Q2 2024 mortgage industry infographic.
Consumer credit trends in the auto sector: Q2 2024
While originations remained down YoY, increased inventories and price declines have driven a significant increase in originations among super prime. Other insights from the report include:
- Originations for Q1 2024 were at 6 million, down 0.4% YoY
- Originations were down across all risk tiers with the exception of super prime which was up 10.3% YoY
- The new/used vehicle distribution continued to trend toward pre-pandemic ratios: 40% of vehicles were financed new as opposed to 60% used in Q1 2024 (compared to 41% new and 59% used in pre-pandemic Q1 2019)
- Total auto finance balances stood at $1.6 trillion in Q2 2024, up 2.7% YoY
- The average amount financed in Q2 2024 was down 3.7% for used vehicles but remained flat for new
- Average monthly payments were down slightly for both new (-0.5%) and used (-1.5%) YoY, largely due to vehicle price stabilization
- 60+ DPD consumer-level delinquency was up slightly YoY to 1.4%
- New vintages continued to show consistent performance when compared to pre-pandemic periods 2018/2019; used vintages are slightly improved over the 2022 cohort but remained worse than 2018/2019
Our view: Subprime continued to see the most significant challenges (down 27.4% from Q1 2019 levels), likely due to affordability concerns. Price stabilization led to monthly payments remaining relatively flat YoY. Higher delinquencies impacted loan availability and are worth watching. There is potential for rate declines with more normal inventory levels, and reduced prices could provide relief to consumers.
Q2 2024 auto loan trends
Auto lending metric
| Q2 2024
| Q2 2023
| Q2 2022
| Q2 2021
|
Total auto loan accounts
| 80.2 million
| 80.2 million
| 80.4 million
| 82.1 million
|
Prior quarter originations1
| 6.0 million
| 6.0 million
| 6.7 million
| 7.3 million
|
Average monthly payment NEW2
| $740
| $741
| $657
| $588
|
Average monthly payment USED2
| $527
| $521
| $509
| $418
|
Average balance per consumer
| $24,199
| $23,501
| $22,178
| $20,548
|
Average amount financed on new auto loans2
| $41,324
| $41,547
| $40,186
| $36,207
|
Average amount financed on used auto loans2
| $25,995
| $26,260
| $27,986
| $22,295
|
Consumer-level delinquency rate (60+ DPD)
| 1.4%
| 1.3%
| 1.1%
| 0.7%
|
1Note: Originations are viewed one quarter in arrears to account for reporting lag.
2Data from S&P Global MobilityAutoCreditInsight, Q2 2024 data only for months of April and May.
Click here for additional auto industry metrics. Click here for a Q2 2024 auto infographic.
For more information about the report, please register for the Q2 2024 Credit Industry Insight Report webinar.
About TransUnion (NYSE:TRU)
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