Last week TransUnion released its Q4 2017 Industry Insights Report on the consumer credit market, revealing increased access to loans (for some), greater usage and relatively low delinquency.
Read the full report here, including charts with data by product line, at TransUnion.
According to the report, most indicators point to a healthy credit market, though there are a few signals that lenders are being more active in rebalancing portfolio risk. The following are ”instant analyses” from the Q4 Report from a range of TransUnion business leaders:
Matt Komos, vice president of research and consulting
“Consumers continue to gain access to more credit, and balances are generally rising at a healthy clip. For the most part, consumers are paying their debts in a timely fashion, which has been especially evident for mortgages and personal loans. This is likely a result of the strong economy, which has helped consumers manage their personal balance sheets and build confidence.”
Paul Siegfried, senior vice president and credit card business leader
“Total employment and strong consumer confidence are thought to be key drivers of overall spending increases and the consequent use of card credit. The number of consumers with access to card credit remains at an all-time high, though originations continue to decline. Yet lenders are demonstrating even more attentiveness when underwriting new accounts. The decrease in originations is driven by continued pullback in high-risk tiers. In addition, while super prime originations saw growth, there was a significant decline in the average new credit line for these accounts, further demonstrating issuer diligence. The demonstrated pullback is likely a response—and not a surprising one—to the increased ratio of below-prime consumers issued card credit in recent years and the associated uptick in credit card delinquencies.”
Brian Landau, senior vice president and automotive business leader
“Auto lending is stabilizing after years of rapid growth. Originations continue to fall at a faster rate than previous years, balance growth is slowing and delinquencies are steady. These metrics reflect the continuing tightening of underwriting, particularly for prime and below risk tiers. Generally speaking, the auto lending sector is performing well as the economy remains relatively strong. We do not observe anything in our data that would point to significant anticipated changes in delinquencies.”
Joe Mellman, senior vice president and mortgage business leader at TransUnion
“Mortgage delinquency rates for Q4 2017 continued to decline, reaching their lowest levels since the recession. This largely reflects recession era defaults having worked their way out of the system and recent originations being underwritten to a very high standard. This quarter we see an interesting dynamic with seemingly contradictory data points: average mortgage debt per borrower increasing while average new account balances declined. There could be multiple factors contributing to this, including cash-out refinancing increasing the average mortgage debt; the drop in refinancing share lowering average new account balances since average refi size can be larger than average purchase size; and a change in the mix of purchase origination amounts toward lower balances.”
Jason Laky, senior vice president and consumer lending business leader
“The last quarter of the year is traditionally the one where delinquencies rise the most. In 2017, the increase in delinquency was muted, leading to the lowest Q4 personal loan delinquency rate that we’ve observed since the end of the recession. This strong performance bodes well for 2018. At the same time, the near prime and prime segments are leading solid growth in originations and loan balances. There are more than 18 million personal loans in the marketplace, which constitutes a 40% increase – or 5.2 million more loans – compared to just three years ago. As traditional lenders return to or enter this market, we expect the number of personal loans will continue to rise.”
The chart below displays the change in key consumer metrics from Q4 2016 to Q4 2017. As noted by Matt Komos, more credit is being issued, and by-and-large, consumers are staying on top of their bills. The full report includes charts showing trends in the credit card, auto and mortgage spaces, as well as the market for unsecured loans.