Despite the shockwaves felt from the COVID-19 pandemic, the
consumer credit market is strongly positioned as many parts of the
country prepare to enter new phases of re-opening this summer. The
just-released Q1 2021 TransUnion (NYSE: TRU) Industry Insights
Report found that consumers are performing well one year since the
pandemic began as serious delinquency rates remain mostly down and
loan originations continue to rise from COVID-19 lows.
The improvements are occurring against a backdrop of a pandemic
that caused one of the greatest shocks in the history of the
American economy. In March 2020, the unemployment rate stood at
4.4%. In April 2020, it jumped to 14.7% -- the highest reading
since 1940. A consequence of this dramatic rise was an equally
immense slowdown in loan originations. Some lenders tightened their
standards and consumers held back on opening loans in the first
months of the pandemic. For instance, unsecured personal loan
originations dropped from 3.9 million in Q1 2020 to 2.6 million in
Q2 2020. Credit card originations declined at an even faster rate –
from 15.5 million to 8.6 million in the same timeframe.
Several early 2021 signs point to more improvements ahead.
Government programs and improving employment helped spur the
University of Michigan Consumer Sentiment Index to move up from
76.8 in February 2021 to 84.9 in March 2021. A report from the
Commerce Department’s Bureau of Economic Analysis (BEA) found that
personal consumption expenditures increased 4.2% in March. And
Oxford Economics anticipates real consumer spending growth of 9.6%
in 2021.
The continued improvements in the economy have led to more loan
activity. In the last two quarters, credit card originations have
risen to 12.3 million (Q3 2020) and 15.5 million (Q4 2020) from the
lows observed in Q2 2020 (8.6 million). As demand for credit rises,
serious delinquency rates stand near record lows. Lending and
credit use slowed in Q2 2020, but government stimulus and
forbearance programs caused an interesting dynamic to play out
where serious delinquency levels have mostly dropped despite
elevated unemployment.
Serious Delinquency Rates Mostly Down
From the Beginning of the Pandemic
Credit Product/Delinquency Rate* |
Q1 2021 |
Q1 2020 |
Credit Card |
1.25% |
1.97% |
Mortgage |
0.81% |
1.13% |
Personal Loan |
2.66% |
3.33% |
Auto Loan |
1.51% |
1.37% |
*Delinquency rates are measured at the consumer level as 60+
days past due for auto and unsecured personal loans and 90+ days
past due for credit cards. They are measured at 90+ days past due
on the account level for mortgages.
“This last year has been like no other, but in many respects it
has highlighted the wherewithal of the U.S. consumer to persevere
under the most extreme conditions,” said Matt Komos, vice president
of research and consulting at TransUnion. “Consumers and lenders,
alike, took more prudent measures with their credit use. Buoyed by
government stimulus programs, many consumers used their benefits to
remain current on accounts. As we near the first half of the year
and more of the country opens, there is a strong sense that pent up
demand for new loans will lift the consumer credit market even
higher.”
For more information about the report, please register for
the TransUnion Q1 2021 IIR Webinar. Additional resources
for consumers looking to protect their credit during the
COVID-19 pandemic can be found at transunion.com/covid-19.
Read on for more for more specific insights about auto loans,
credit cards, mortgages and personal loans.
Credit Card Balances Continue Declining in
2021
Q1 2021 IIR Credit Card Summary
Credit card balances continued to decline in Q1 2021 with total
balances dropping to $688 billion from $814 billion in Q1 2020.
Average consumer credit card debt per borrower dropped to $4,791,
the lowest level since at least 2009 when TransUnion first began
measuring this variable. Total credit card originations fell nearly
18% year over year across all credit risk tiers with average lines
on new accounts declining 28% in the same timeframe. Despite this
decline, consumers with access to a credit card increased 2.1% in
the last year to 188 million. This is a continuation of a 10-year
growth trend. Serious consumer-level delinquency rates (90+ days
past due) dropped to 1.25% in Q1 2021, down 72 basis points from
one year ago. This immense drop is likely due to a combination of
consumers having more liquidity due to the various government
stimulus programs and borrowers protecting this particular credit
product during the pandemic.
Instant Analysis
“We observed a continuation in the decline in
credit card balances to begin 2021 as many consumers used stimulus
payments and income tax returns to pay down these debts. New
account originations activity continued its uptrend and return to
‘normal’ levels. For those consumers opening new credit cards, the
lines have been relatively low as lenders are controlling for the
uncertainties still in the market. As more issuers ramp up their
acquisition marketing efforts with new and sophisticated
approaches, we anticipate originations and credit lines to move
closer to levels seen in recent years.”
- Paul Siegfried, senior vice
president and credit card business leader at
TransUnion
Q1 2021 Credit Card Trends
Credit Card Lending Metric |
Q1 2021 |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Number of Credit Cards |
454.6 million |
457.6 million |
432.8 million |
416.5 million |
Borrower-Level Delinquency Rate (90+ DPD) |
1.25% |
1.97% |
1.89% |
1.78% |
Average Debt Per Borrower |
$4,791 |
$5,653 |
$5,554 |
$5,472 |
Prior Quarter Originations* |
15.5 million |
18.9 million |
16.5 million |
16.0 million |
Average New Account Credit Lines* |
$3,696 |
$5,128 |
$5,296 |
$5,283 |
*Note: Originations are viewed one quarter in
arrears to account for reporting lag.
Mortgage Originations Continue to Spike in Low Interest
EnvironmentQ1 2021 IIR Mortgage Loan
Summary
The surge in mortgage originations continued in Q4 2020 (viewed
one quarter in arrears) as serious delinquencies headed lower in Q1
2021. Mortgage origination volume increased to more than 4 million
in Q4 2020, 73% higher than at the same time last year. It is the
highest quarterly volume recorded since TransUnion began tracking
the metric in 2011. Refinancing made up 53% of the share compared
to 47% from purchase. One year earlier, refinance constituted 43%
of share compared to 57% for purchase. Both purchase and
refinancing rose significantly in the last year with purchase up
42% and rate and term refinance increasing 160%. Cash out
refinancing also increased 64% from the previous year. Serious
mortgage delinquency rates continued to decline, falling from 1.13%
in Q1 2020 to 0.81% in Q1 2021 – the lowest level observed in at
least 10 years. The number of mortgage accounts in accommodation
status remained elevated.
Instant Analysis
“The low interest rate environment and rising home values are
driving the mortgage market. Housing demand is outweighing housing
supply, which is causing the rise in home values. At the same time,
higher home values are giving more consumers opportunities to
refinance and conduct cash out refinancing. Serious delinquency
rates are at near record lows, partly driven by the percentage of
accounts in accommodation status. While we anticipate delinquency
rates to move higher once these accounts come out of accommodation,
we also expect many of these consumers to do all they can to make
payments and protect the equity in their homes.”
- Joe Mellman, senior vice president and mortgage
business leader at TransUnion
Q1 2021 Mortgage Trends
Mortgage Lending Metric |
Q1 2021 |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Number of Mortgage Loans |
53.8 million |
53.9 million |
53 million |
53.1 million |
Account-Level Delinquency Rate (90+ DPD)* |
0.81% |
1.13% |
1.20% |
1.49% |
Prior Quarter Originations** |
4.2 million |
2.5 million |
1.5 million |
1.8 million |
Average Balance of New Mortgage
Loans* |
$296,505 |
$286,912 |
$252,600 |
$249,273 |
Borrower-Level Delinquency Rate (90+ DPD) |
0.68% |
0.78% |
0.91% |
1.14% |
Average Debt Per Borrower |
$222,849 |
$215,178 |
$209,402 |
$203,887 |
* Delinquency rates are based on data reported to TransUnion.**
Originations are viewed one quarter in arrears to account for
reporting lag.
Personal Loan Originations Continue a Slow
RecoveryQ1 2021 IIR Personal Loan
Summary
Personal loan originations began to recover in the Q4 2020,
steadily growing after the market contracted nearly 50% in Q2 2020,
and 30% in Q3 2020. Originations were still 20% below Q4 2019
levels. FinTechs and Bank lenders continue to see more significant
year-over-year declines. In Q1 2021, total balances fell for the
fourth consecutive quarter – led by 10%+ declines in the below
prime tiers. Interestingly, super prime borrowers experienced a
6.3% increase in balance growth during the same timeframe. Serious
delinquency rates dropped 73 basis points in the last year and now
stand at 2.66% as of Q1 2021, even as the number of accounts in
accommodation declines. Government stimulus and higher savings
rates continue to contribute to lower delinquency.
Instant Analysis
“While many lenders are looking to return to growth in the
coming quarters, we anticipate consumer demand for personal loans
to grow more slowly. Personal loans are often used for debt
consolidation, and credit card balances were down significantly in
2020 and will take time to rebuild. As more states re-open their
economies, we expect to see more activity as consumers seek to
finance vacations, home improvements and other large purchases. We
also expect that lenders will continue to gain confidence in the
economy and open their buy-boxes to higher risk consumers, which
could drive growth.”
- Liz Pagel,
senior vice president and consumer lending business leader at
TransUnion
Q1 2021 Unsecured Personal Loan
Trends
Personal Loan Metric |
Q1 2021 |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Total Balances |
$146.2 billion |
$162.4 billion |
$143 billion |
$120 billion |
Number of Unsecured Personal Loans |
20.8 million |
23.4 million |
21.4 million |
19.2 million |
Number of Consumers with Unsecured Personal
Loans |
18.9 million |
20.9 million |
19.3 million |
17.6 million |
Borrower-Level Delinquency Rate (60+ DPD) |
2.66% |
3.39% |
3.47% |
3.51% |
Average Debt Per Borrower |
$8,999 |
$9,025 |
$8,618 |
$6,258 |
Prior Quarter Originations* |
4.17 million |
5.23 million |
4.99 million |
4.55 million |
Average Balance of New Unsecured Personal
Loans* |
$5,213 |
$5,619 |
$5,432 |
$5,044 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag.
Auto Loan Market Continues to Recover, Though Subprime
Activity May be Key to Future GrowthQ1 2021 IIR
Auto Loan SummaryThe broader auto finance market continued
to largely recover in Q1 2021 with average debt per borrower
topping $20,000 for the first time since TransUnion began tracking
the metric. Originations continued to increase in Q4 2020, though
at a slower rate than Q3. The slowdown is primarily due to fewer
loans originated to subprime borrowers. However, early counts in Q1
2021 point to some recovery happening for this subset of the
population. Serious delinquency rates for auto loans increased in
Q1 2021, moving to 1.51% from 1.37% one year earlier. The slight
rise in aggregate delinquency rates is, in part, driven by lower
subprime originations. Vintage analysis is showing that auto
portfolios across all risk tiers remain healthy.
Instant Analysis “The auto finance market
continues its recovery after encountering the depths of the
pandemic last year. The strength of originations, balances and loan
performance point to a market where lenders have continued to make
credit available to borrowers; while government stimulus, falling
unemployment and tax refund season have all helped strengthen
household balance sheets. All of these factors point to rebound in
subprime originations in Q1 2021 and beyond. While overall
delinquency rates continue to rise, they appear to be at manageable
levels. At the onset of the pandemic, there was a fear that we
might see a major spike in auto delinquency rates, especially as
most consumers were locked down in their homes. That fear never
materialized and we anticipate more auto loan growth and continued
good performance in the near future.”
- Satyan Merchant, senior vice president and automotive
business leader at TransUnion
Q1 2021 Auto Loan Trends
Auto Lending Metric |
Q1 2021 |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Number of Auto Loans |
83.2 million |
83.8 million |
82.2 million |
79.7 million |
Borrower-Level Delinquency Rate (60+ DPD) |
1.51% |
1.37% |
1.31% |
1.32% |
Average Debt Per Borrower |
$20,001 |
$19,302 |
$18,845 |
$14,837 |
Prior Quarter Originations* |
6.7 million |
6.9 million |
6.7 million |
6.6 million |
Average Balance of New Auto
Loans* |
$24,677 |
$22,764 |
$22,128 |
$21,678 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag.
For more information about the report, please register for
the TransUnion Q1 2021 IIR Webinar.
About TransUnion (NYSE: TRU)TransUnion is a
global information and insights company that makes trust possible
in the modern economy. We do this by providing a comprehensive
picture of each person so they can be reliably and safely
represented in the marketplace. As a result, businesses and
consumers can transact with confidence and achieve great things. We
call this Information for Good.®
A leading presence in more than 30 countries across five
continents, TransUnion provides solutions that help create economic
opportunity, great experiences and personal empowerment for
hundreds of millions of people.
http://www.transunion.com/business
Contact |
Dave
Blumberg |
|
TransUnion |
E-mail |
dblumberg@transunion.com |
Telephone |
312-972-6646 |
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