Serious Delinquencies Normalizing to Pre-Pandemic Levels as Many Lenders Make Concerted Effort to Expand Access to Credit
Q2 2022 TransUnion Credit Industry Insights Report explores latest credit trends
CHICAGO, Aug. 04, 2022 (GLOBE NEWSWIRE) -- The first half of 2022 concluded with a normalization in serious delinquency rates to pre-pandemic levels for most credit products as lenders continued to expand access to credit cards and personal loans. TransUnion’s (NYSE: TRU) newly released Q2 2022 Quarterly Credit Industry Insights Report (CIIR) also highlighted how the number of consumers with credit cards and personal loans has reached record highs, driven by an increase in loans to non-prime consumers.
“Consumers are facing several challenges that are impacting their finances on a day-to-day basis, namely high inflation and rising interest rates. These challenges, though, are happening against a backdrop where employment opportunities are still plentiful and jobless levels remain low. We see lenders offering more access to credit to non-prime consumers, some of whom are new to credit,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion. “This is a welcome development as more consumers have gained access to credit during a time when high inflation has placed a greater burden on their wallets. While delinquencies generally rise after a period when more non-prime borrowers secure loans, the rates of delinquency remain mostly at or below pre-pandemic levels, particularly for cards and personal loans.”
In Q2 2022, loan growth to non-prime borrowers has mostly been observed with unsecured personal loans and credit cards. These two credit products were utilized more by consumers in the last year due to higher costs of everyday goods and services. For instance, the share of balances for unsecured loans held by subprime borrowers has risen from 8.1% in Q2 2021 to 11.8% in Q2 2022. Subprime balance distribution for credit cards rose to 6.9% in Q2 2022 from 5.3% in Q2 2021.
Loan Growth and Balances Rising for Credit Cards and Unsecured Personal Loans | ||
Key Metrics | Q2 2022 | Q2 2021 |
Consumers with Access to a Credit Card | 161.6 million | 153.3 million |
Average Credit Card Debt per Borrower | $5,270 | $4,817 |
Consumers with Access to a Personal Loan | 21.0 million | 18.7 million |
Average Personal Loan Debt per Borrower | $10,344 | $9,079 |
In another sign that the consumer credit markets are performing relatively well, TransUnion’s Credit Industry Indicator (CII) increased to 119 in Q2 2022 – up from 116 in the previous quarter and at the same level as it was in Q2 2021. The CII is a quarterly measure of depersonalized and aggregated consumer credit health trends that summarizes movements in credit demand, credit supply, consumer credit behaviors and credit performance metrics over time into a single indicator. Examples of data elements categorized into these four pillars include: new product openings, consumer credit scores, outstanding balances, payment behaviors, and 100+ other variables.
Rising levels for the CII generally indicate an improvement in the overall health of the consumer credit market. The stable CII level in Q2 2022 compared to the prior year period was due to the increases in credit demand and supply, as consumers increased their applications for and originations of credit products, particularly cards and personal loans, over the past year, somewhat offset by rising YoY delinquencies from the extremely low levels seen in Q2 2021.
To learn more about the latest consumer credit trends, register for the Q2 2022 Quarterly Credit Industry Insights Report Webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.
Gen Z Leading Growth in Credit Card Originations
Q2 2022 CIIR Credit Card Summary
The number of general-purpose credit cards topped 500 million for the first time ever at the conclusion of Q2 2022, up from approximately 465 million in Q2 2021. The increase was led by Gen Z as originations to this generation rose 31.6% between Q1 2021 and Q1 2022 (originations are viewed one quarter in arrears). Overall, originations were up 26% in the last year. The subprime segment’s total balances grew 51.7% YoY which is the highest growth rate ever achieved. At the same time, average credit lines remain below pre-pandemic levels, with the exception of super prime which hit an all-time high. Serious delinquency rates (90+ days past due) for borrowers rose to 1.57%, but remain near pre-pandemic levels.
Instant Analysis
“We observed positive trends in the credit card industry in the first half of 2022, with more younger and subprime borrowers gaining access to credit cards. While serious delinquencies are rising, that is to be expected when more consumers – many of whom are new to credit – secure a credit card. On the positive side, serious delinquencies are nowhere near concerning levels. The employment picture still remains relatively strong, though increased interest rates and high inflation are placing more pressure on consumers. Overall, it’s a positive for the credit ecosystem to have younger consumers gain access to credit so they can build their credit profiles for the future.”
- Paul Siegfried, senior vice president and credit card business leader at TransUnion
Q2 2022 Credit Card Trends | ||||
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Credit Card Lending Metric | Q2 2022 | Q2 2021 | Q2 2020 | Q2 2019 |
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Number of Credit Cards | 500.0 million | 464.9 million | 453.6 million | 439.2 million |
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Borrower-Level Delinquency Rate (90+ DPD) | 1.57% | 0.95% | 1.49% | 1.72% |
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Average Debt Per Borrower | $5,270 | $4,817 | $5,223 | $5,635 |
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Prior Quarter Originations* | 18.9 million | 15.0 million | 15.5 million | 15.3 million |
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Average New Account Credit Lines* | $5,035 | $3,974 | $5,274 | $5,789 |
*Note: Originations are viewed one quarter in arrears to account for reporting lag. | ||||
Personal Loan Total Balances Reach Record $192 Billion as Below Prime Borrowers Increase
Q2 2022 CIIR Personal Loan Summary
Total personal loan balances reached a record $192 billion in Q2 2022 – a 31% increase from last year. Total balances nearly doubled for subprime borrowers (up 92%) while more modestly increasing, by 10%, for super prime borrowers. Originations in Q1 2022 (viewed one quarter in arrears) grew nearly 60% year-over-year to reach 5 million, with all credit risk tiers experiencing at least 20% growth from the previous year. Subprime borrowers saw the largest rise in originations at 71%. As subprime borrowers take a larger share of personal loan accounts, serious borrower delinquency rates (60+ days past due) have now risen four straight quarters. The 3.37% Q2 2022 reading is up 47% from last year, though it remains near the levels seen prior to the pandemic.
Instant Analysis
“The recent record growth in unsecured personal lending is partly due to lenders’ expansion into below prime risk tiers in the first half of 2022. As expected, increased lending to these risk tiers drove increased overall delinquency rates, but serious delinquencies still remain near pre-pandemic levels. As lenders look to continue to grow, a shift to more prime and above consumers is possible as demand is expected to continue due to rising costs from inflation.”
- Liz Pagel, senior vice president and consumer lending business leader at TransUnion
Q2 2022 Unsecured Personal Loan Trends | ||||
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Personal Loan Metric | Q2 2022 | Q2 2021 | Q2 2020 | Q2 2019 |
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Total Balances | $192 billion | $146 billion | $153 billion | $145 billion |
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Number of Unsecured Personal Loans | 24.9 million | 20.7 million | 22.2 million | 21.6 million |
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Number of Consumers with Unsecured Personal Loans | 21.0 million | 18.7 million | 20.0 million | 19.6 million |
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Borrower-Level Delinquency Rate (60+ DPD) | 3.37% | 2.28% | 3.10% | 3.14% |
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Average Debt Per Borrower | $10,344 | $9,079 | $8,895 | $8,596 |
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Prior Quarter Originations* | 5.0 million | 3.2 million | 3.9 million | 3.8 million |
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Average Balance of New Unsecured Personal Loans* | $8,085 | $7,129 | $6,631 | $6,662 |
*Note: Originations are viewed one quarter in arrears to account for reporting lag. | ||||
Auto Loan Performance Mixed as Supply Chain Challenges and Rising Interest Rates Impacting Affordability
Q2 2022 CIIR Auto Loan Summary
Serious auto loan delinquencies (60+ days past due) increased 40 basis points between Q2 2021 and Q2 2022, but performance differs for recent vintage loans. For instance, loans originated in Q2 and Q3 2020 continue to outperform pre-pandemic vintages while loans from Q2 and Q3 2021 are beginning to perform on par with them. Originations in Q1 2021 declined 8.3% from the previous year, though they remain above Q1 2019 levels. The cost to finance vehicles remains high, as witnessed by a $2,000+ year-over-year increase in average auto loan debt per borrower in Q2 2022. Used vehicles are helping propel the debt metric, with average used vehicle monthly payments rising 22% on a year-over-year basis to $505 in Q1 2022.
Instant Analysis
“Supply chain challenges continue to impact the auto finance market with affordability eroding for many consumers. There’s a clear trend in rising monthly payments for both new and used vehicles, which have also been driven higher by the Federal Reserve’s recent rate hikes. Increased costs to consumers may be seen as an opportunity for some lenders with credit unions gaining market share, possibly because they are often able to offer lower interest rates to auto loan borrowers. Affordability challengers are likely causing a rise in serious auto loan delinquency rates, though performance is not uniform for recent vintage loans.”
- Satyan Merchant, senior vice president and automotive business leader at TransUnion
Q2 2022 Auto Loan Trends | ||||
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Auto Lending Metric | Q2 2022 | Q2 2021 | Q2 2020 | Q2 2019 |
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Number of Auto Loans | 81.4 million | 83.2 million | 83.5 million | 82.7 million |
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Borrower-Level Delinquency Rate (60+ DPD) | 1.63% | 1.23% | 1.51% | 1.23% |
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Prior Quarter Originations* | 6.8 million | 7.4 million | 6.3 million | 6.7 million |
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Prior Quarter Average Monthly Payment NEW** | $654 | $590 | $581 | $564 |
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Prior Quarter Average Monthly Payment USED** | $505 | $414 | $394 | $386 |
Average Balance |
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of New Auto Loans* | $28,523 | $20,466 | $19,397 | $18,952 |
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Average Debt Per Borrower | $22,085 | $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. | ||||
HELOCs Continue Resurgence as Available Home Equity1 Up 22% Over the Last Year
Q2 2022 CIIR Mortgage Loan Summary
Available home equity of mortgage holders continues to grow, hitting an aggregate total of $18.4 trillion in Q1 2022 (latest data available) and is up 22% YoY and 52% over the last 5 years. Approximately 80 million consumers have available equity in their homes, with a median equity of $223,000 and around 4.5 million homeowners having more than $1 million in available equity. As a result, homeowners are tapping the record levels of equity in their homes, with HELOC and home equity loan originations increasing YoY by 41% (the highest volumes booked since the end of 2019) and 29%, respectively. As home equity grew, the slowdown in mortgage originations accelerated in Q1 2022 with purchases dominating originations for the fourth consecutive quarter. Compared to the previous year, where refinance dominated origination volumes and accounted for 58% of new mortgage loans, in 2022, purchase volumes outpaced refinance volumes, up by 18 percentage points from 42% in Q1 2021 to 60% in Q1 2022. Purchase volumes decreased from 1.6 million in Q1 2021 to 1.3 million in Q1 2022 (down by 20% YoY) while refinance volumes decreased from 2.3 million in Q1 2021 to 870,000 in Q1 2022 (down by 62% YoY). Approximately 2.2 million total mortgages were originated in Q1 2022, down 45% from the previous year. Q1 2022 volumes, though, remain above pre-pandemic levels with the average volume of originations between 2010 and 2019 averaging about 1.5 million per quarter. Serious mortgage loan delinquencies in Q2 2022 remain near record lows and have remained flat since Q2 2021.
Instant Analysis
“Mortgage lenders are now considering adding home equity lending to their portfolios as they look for growth in a declining refinance market and seek opportunities to cross-sell to their existing customer base by tapping into historic amounts of home equity. Consumers are increasingly interested in HELOC and home equity loan lending – leveraging rising home values to access affordable capital. Having a comprehensive understanding of industry dynamics in relation to the home equity market can help mortgage lenders identify homeowners in the market for home equity. Utilizing tools that can identify how much equity a homeowner has in their property such as CLTV insights becomes critical in targeted campaigns. This is ever-important as rising interest rates place additional pressure on the housing market and on consumers.”
- Joe Mellman, senior vice president and mortgage business leader at TransUnion
1 80% of value of all residential properties less sum of mortgage and home equity balances of homeowners with risk scores above 620
Q2 2022 Mortgage Trends | ||||
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Mortgage Lending Metric | Q2 2022 | Q2 2021 | Q2 2021 | Q2 2019 |
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Number of Mortgage Loans | 51.8 million | 51.2 million | 50.7 million | 50.0 million |
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Account-Level Delinquency Rate (90+ DPD) | 0.58% | 0.60% | 0.84% | 0.94% |
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Prior Quarter Originations* | 2.2 million | 3.9 million | 2.2 million | 1.2 million |
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Mortgage Origination* Distribution – Purchase | 60% | 42% | 51% | 74% |
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Mortgage Origination* Distribution – Refinance | 40% | 58% | 49% | 26% |
Average Balance |
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of New Mortgage Loans* | $322,631 | $298,115 | $291,420 | $260,182 |
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Number of HELOC Originations* | 291,736 | 207,422 | 243,370 | 235,722 |
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Number of Home Equity Loan Originations* | 203,093 | 157,159 | 148,727 | 140,420 |
* 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 Q2 2022 Credit Industry Insight Report 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 an actionable picture of each person so they can be reliably 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 |
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| TransUnion |
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| dblumberg@transunion.com | |
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Telephone |
| 312-972-6646 |
