Consumer Credit Market Concludes 2017 on a High Note

Q4 2017 TransUnion Industry Insights Report reveals strength is due to increased access to loans, greater usage and relatively low delinquency levels

CHICAGO, Feb. 20, 2018 (GLOBE NEWSWIRE) -- The consumer credit market concluded 2017 on a high note with strong performance across multiple credit products. TransUnion’s (NYSE:TRU) newly released Q4 2017 Industry Insights Report, powered by PramaSM analytics, found that most indicators point to a healthy credit market, though there are a few signals that lenders are being more active in rebalancing portfolio risk.

“Consumers continue to gain access to more credit, and balances are generally rising at a healthy clip,” said Matt Komos, vice president of research and consulting at TransUnion. “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.”

 Positive Signs: Changes between Q4 2017 and Q4 2016 for Key Consumer Credit Metrics

Credit ProductChange in Number of AccountsChange in Serious Delinquency RatesChange in Average Debt Per BorrowerChange in SubPrime Borrowers with a Balance
Auto+ 4.8%- 1 bps+ $206- 1.7%
Credit Card+ 3.5%+ 8 bps+ $158+ 3.7%
Mortgage+ 2.3%- 42 bps+ $7,321- 4.7%
Personal Loans+ 7.5%- 54 bps+ $443- 6.7%

*Note that bps = basis points; 1 bp = 0.01%. Serious delinquency is defined here as borrower delinquency rates of 60 or more days past due (60+ DPD) for all credit products except credit cards, for which 90+ DPD is used.

During 2017, TransUnion observed 20.3 million more accounts spanning auto, credit card, mortgage and unsecured personal loans. The growth is likely due to continued declines in the unemployment rate, which decreased to 4.1% in Q4 2017 compared to 4.7% in Q4 2016. Additionally, the University of Michigan’s Index of Consumer Sentiment—a measure of consumer confidence—was at 95.9 in December 2017, up 2% from December 2016. “This demonstrates consumers have positive expectations regarding the overall economy, and we anticipate this will lead to higher consumer credit activity in the near future,” added Komos.

“While most indicators point to a fluid consumer credit economy, we are monitoring the market closely for any potential shifts,” Komos continued. “Material upticks in delinquency, interest rate increases beyond what is expected, or other unanticipated economic shocks could certainly impact the market adversely.”

Please visit TransUnion’s Industry Insights Report website  for more charts and details about the Q4 2017 Industry Insights Report or to register for TransUnion's Q4 2017 Industry Insights Webinar.

Two New Trends in the Credit Card Marketplace

Q4 2017 IIR Credit Card Summary
TransUnion’s latest Industry Insights Report found two new trends in the credit card marketplace. While originations in Q3 2017 decreased 6.8% on an annual basis overall, consumers in the super prime risk tier experienced a 1.2% increase (originations are viewed one quarter in arrears to ensure all accounts are included in the data). Additionally, average new account credit lines decreased 3.3% in Q3 2017 compared to the prior year, driven by both the subprime and super prime segments, as card issuers continue deliberate management of risk exposure for new accounts. As shifts continue for originations, TransUnion found that total credit card balances continued to increase, rising 6.6% in the past year to conclude 2017 at $764 billion. Serious credit card delinquency rates per borrower (90+ DPD) continued to increase in Q4 2017 to 1.87% due to the broadening of lending across the credit spectrum.

Instant Analysis

“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.”

- Paul Siegfried, senior vice president and credit card business leader at TransUnion

 Q4 2017 Credit Card Trends

 Credit Card Lending MetricQ4 2017Q4 2016Q4 2015Q4 2014
Number of Credit Cards  418.6 million 404.4 million 381.2 million 364.2 million
Borrower-Level Delinquency Rate (90+ DPD) 1.87% 1.79% 1.59% 1.48%
 Average Debt Per Borrower$5,644 $5,486 $5,337 $5,329 
Prior Quarter Originations*16.3 million17.5 million15.4 million 14.4 million
Average New Account Credit Lines*$5,194 $5,373 $5,068 $4,907 

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

 Q4 2017 Credit Card Performance by Age Group

Generation90+ DPDAnnual Pct. ChangeAverage Loan Balances Per ConsumerAnnual Pct. Change
Gen Z (1995 – present)2.69%+4.3%$1,189+26.5%
Millennials (1980-1994)2.77%+0.7%$4,243+11.2%
Gen X (1965-1979)2.35%+2.6%$7,212+4.6%
Baby Boomers (1946-1964)1.21%+5.2%$6,501+0.8%
Silent (Until 1945)0.78%+6.8%$4,025+0.2%

Auto Loan Growth Slowing, Though Number of Such Loans Rises to Nearly 80 Million

Q4 2017 IIR Auto Loan Summary
While auto loan balances grew 5.5% between Q4 2016 and Q4 2017, this marked the lowest annual growth rate since a 5.3% rise in Q2 2012 over Q2 2011. Despite a slowdown in balance growth, TransUnion observed a marked increase in the number of auto loans—growing to 79.4 million in Q4 2017 compared to 75.8 million one year prior. Originations declined on a yearly basis for the fifth consecutive quarter, falling 4.8% in Q3 2017. The decline in originations was driven by an 8.2% yearly drop for the subprime, near prime and prime credit risk categories, though that was partially dampened by only a 0.2% annual decline in the prime plus and super prime risk categories. Serious auto loan delinquency rates per borrower (60+ DPD) also remained stable, improving 1 bp to 1.43% at the end of 2017.

Instant Analysis

“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.”

- Brian Landau, senior vice president and automotive business leader at TransUnion

 Q4 2017 Auto Loan Trends

 Auto Lending MetricQ4 2017Q4 2016Q4 2015Q4 2014
 Number of Auto Loans 79.4 million75.8 million 71.1 million 65.2 million
 Borrower-Level Delinquency Rate (60+ DPD)  1.43% 1.44% 1.27% 1.19%
 Average Debt Per Borrower$18,597 $18,391 $18,004 $17,456 
Prior Quarter Originations*7.1 million7.5 million7.5 million7.0 million
Average Balance of New Auto Loans*$20,909 $20,743 $20,245 $19,710 

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

 Q4 2017 Auto Loan Performance by Age Group

Generation60+ DPDAnnual Pct. ChangeAverage Loan Balances Per ConsumerAnnual Pct. Change
Gen Z (1995 – present)1.90%+1.1%$13,853+2.8%
Millennials (1980-1994)1.90%-2.1%$17,619+2.0%
Gen X (1965-1979)1.61%-2.4%$20,868+1.9%
Baby Boomers (1946-1964)0.88%0.0%$18,532+0.6%
Silent (Until 1945)0.77%+1.3%$14,593-1.3%

Mortgage Delinquency Rates Keep Declining While Interest Rate Rises Most Impacting New Account Balances

Q4 2017 IIR Mortgage Loan Summary
The serious mortgage delinquency rate (60+ DPD) declined to 1.86% in Q4 2017 from 2.28% in Q4 2016. Mortgage delinquency rates have now dropped on an annual basis every quarter since the recession.  Average mortgage debt for all borrowers rose to $201,736 at the conclusion of 2017, up more than $7,000 from the previous year. Interestingly, at the same time TransUnion noted average new mortgage account balances (measured in the prior quarter, due to reporting lag) decreased on an annual basis. New mortgage account balances declined to $228,563 in Q3 2017 from $235,820 in Q3 2016. This is a reversal from a trend where such balances rose on an annual basis each quarter between Q3 2014 and Q4 2016. 

Instant Analysis
“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.”

- Joe Mellman, senior vice president and mortgage business leader at TransUnion

 Q4 2017 Mortgage Loan Trends

 Mortgage Lending MetricQ4 2017Q4 2016Q4 2015Q4 2014
 Number of Mortgage Loans 53.2 million 52.0 million 52.6 million 53.5 million
Borrower-Level Delinquency Rate (60+ DPD) 1.86% 2.28% 2.46% 3.40%
Average Debt Per Borrower$201,736 $194,415 $189,914 $187,311 
Prior Quarter Originations*1.9 million2.2 million1.9 million1.5 million
Prior Quarter Average Balance of New Mortgage Loans*$228,563 $235,820 $214,799 $201,266 

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

 Q4 2017 Mortgage Loan Performance by Age

Generation60+ DPDAnnual Pct. ChangeAverage Loan Balances Per ConsumerAnnual Pct. Change
Gen Z (1995 – present)1.23%-6.8%$140,063+7.6%
Millennials (1980-1994)1.55%-18.8%$211,125+7.0%
Gen X (1965-1979)2.33%-18.8%$231,078+3.3%
Baby Boomers (1946-1964)1.60%-17.9%$182,117+1.9%
Silent (Until 1945)1.77%-12.4%$150,091+1.4%


Low Personal Loan Delinquency Rate at Conclusion of 2017 Bodes Well for 2018 Performance

Q4 2017 IIR Personal Loan Summary
Unsecured personal loans continued to perform well at the conclusion of 2017, with serious delinquency rates dropping to 3.29% from 3.83% in Q4 2016. This was an especially strong performance, as delinquency rates in the fourth quarters of recent years have generally been observed at rates 40 to 50 basis points higher. Total personal loan balances finished 2017 at $117 billion, up from $102 billion at the close of 2016.  Average debt per borrower rose to $8,083 in Q4 2017, approximately $400 higher than in Q4 2016. Originations in Q3 2017 picked up, rising 6.9% on an annual basis, following a nearly flat growth last quarter and four quarters of consecutive declines prior to that. Much of the increase can be attributed to growth in loans to prime and above consumers.

Instant Analysis 
“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.”

- Jason Laky, senior vice president and consumer lending business leader at TransUnion

 Q4 2017 Unsecured Personal Loan Trends

 Personal Loan MetricQ4 2017Q4 2016Q4 2015Q4 2014
Total Balances$117 billion$102 billion$88 billion$70 billion
Number of Unsecured Personal Loans 18.2 million 16.9 million 15.0 million 13.0 million
Borrower-Level Delinquency Rate (60+ DPD)3.29% 3.83% 3.62% 3.73%
 Average Debt Per Borrower$8,083 $7,640 $7,360 $6,741 
Prior Quarter Originations*3.8 million3.5 million3.8 million3.4 million
Average Balance of New Unsecured Personal Loans*$6,218 $5,443 $5,303 $4,698 

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

 Q4 2017 Unsecured Personal Loan Performance by Age

Generation60+ DPDAnnual Pct. ChangeAverage Loan Balances Per ConsumerAnnual Pct. Change
Gen Z (1995 – present)5.69%-22.1%$ 3,124+23.3%
Millennials (1980-1994)4.40%-18.4%$ 6,962+11.3%
Gen X (1965-1979)3.28%-14.8%$ 9,343+7.3%
Baby Boomers (1946-1964)2.36%-11.9%$ 8,351+3.4%
Silent (Until 1945)2.27%-7.0%$ 6,958-0.9%

About TransUnion (NYSE:TRU)

Information is a powerful thing. At TransUnion, we realize that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions. We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide. We call this Information for Good

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