Consumer Credit Appetite Remains High Despite Elevated Interest Rates

Rhea-AI Summary

The Q1 2024 TransUnion Credit Industry Insights Report (CIIR) highlights resilience in the consumer credit market despite persistent high interest rates. Key findings include a growth of 20 million bankcards YoY, totaling 543 million. Average new bankcard account credit lines increased by 3.8% to $5,628. Unsecured personal loan balances grew 9% YoY to $245 billion, with a 5% increase in the number of consumers holding these loans. However, delinquencies have risen across several products, with a notable decrease in unsecured personal loan delinquencies. Mortgage originations were down 11% YoY, with high interest rates continuing to dampen the market. Auto loan originations remained stable with higher delinquencies. Despite challenges, the credit market remains resilient with hopes pinned on stable unemployment rates.

Positive

• Bankcards grew by 20 million YoY, totaling 543 million.
• Average new bankcard account credit lines rose by 3.8% to $5,628.
• Unsecured personal loan balances increased by 9% to $245 billion.
• Number of consumers with unsecured personal loans rose by 5% YoY.
• Bankcard balances increased by 11.3% YoY, surpassing $1 trillion.
• Super prime originations led growth in bankcard and unsecured personal loans.
• Average debt per borrower in bankcards increased 8.5% YoY to $6,218.
• FHA mortgage originations increased by 9% YoY in Q4 2023.

Negative

• Credit card delinquencies increased, with 90+ DPD up by 29bps YoY to 2.55%.
• Total new account credit lines decreased by 2.6% due to tightening origination environment.
• Delinquencies rose across credit cards, mortgages, and auto loans.
• Mortgage originations were down 11% YoY due to high interest rates.
• Auto loan delinquencies increased to 1.33% in Q1 2024.
• Subprime unsecured personal loan originations declined nearly 5% YoY.
• Overall mortgage delinquencies increased to 1.14% compared to 0.90% YoY.
• Auto loan originations remain below pre-pandemic levels, especially among below prime risk tiers.

Insights

Financial Analyst

Consumer credit activity remains strong despite higher interest rates, a point which stands out significantly in TransUnion's Q1 2024 report. From a financial perspective, this indicates a resilient consumer base that continues to rely on credit to manage expenses. The increase in the number of bankcards by 20 million YoY and the rise in average new bankcard account credit lines to $5,628 are notable metrics.

However, the decline in total new account credit lines by 2.6% suggests a tightening credit environment, likely due to stricter lending standards. This could potentially limit access to new credit for riskier borrowers, posing a risk for credit growth in the near term.

The increase in unsecured personal loans by 9% YoY to $245 billion is another critical point. While this shows consumer confidence in leveraging credit, it also means higher debt service obligations amid rising interest rates. Investors should watch for how these trends impact the overall financial health of consumers.

In summary, while the high consumer credit appetite can be taken as a positive signal of economic resilience, the associated rise in delinquencies and the possibility of tighter credit conditions warrant caution.

Rating: 1 (positive)

Credit Risk Expert

The report highlights a concerning rise in delinquencies across several credit products, except for unsecured personal loans, which saw a decline in borrower-level delinquencies by 3.75% YoY. This divergence suggests that while overall credit utilization is growing, so is the risk of default, particularly in credit cards, mortgages and auto loans.

The increase in 90+ days past due (DPD) rates for credit cards to 2.55% is particularly alarming, as it indicates a growing strain on consumers' ability to service their debt. The uptick in delinquency rates across prime and below risk segments hints at broader economic vulnerabilities despite the resilient credit usage.

Furthermore, the 11.3% YoY increase in total bankcard balances and the rise in average debt per borrower to $6,218 suggest that consumers are heavily reliant on credit to navigate economic challenges. This could lead to higher default rates in a prolonged high-interest environment, impacting lenders' balance sheets.

Overall, the data points to a mixed outlook where the buoyant credit market is tempered by rising delinquency risks.

Rating: 0 (neutral)

Economic Analyst

The insights provided by the Q1 2024 TransUnion report reflect broader economic themes. Consumers' increased reliance on credit amidst persistent inflation and high interest rates underscores the pressure on household finances. The report indicates that inflation is a more immediate concern for consumers than high-interest rates, leading them to tap into available credit lines.

Another significant point is the super prime segment's growth in credit lines and origination volumes. This suggests that higher-income individuals are leveraging credit more, possibly to take advantage of investment opportunities or to maintain lifestyle standards amidst rising costs.

In contrast, the slowing growth rate in total balances and the increase in delinquencies across most credit products highlight the economic strain. This duality suggests that while some consumers can manage increased financial burdens, others are increasingly feeling the pinch.

For retail investors, these trends signal a cautious optimism where consumer credit remains robust but fraught with risks related to rising delinquency rates.

Rating: 1 (positive)

Q1 2024 TransUnion Credit Industry Insights Report explores the latest credit trends

CHICAGO, May 16, 2024 (GLOBE NEWSWIRE) -- Findings from the newly released Q1 2024 Quarterly Credit Industry Insights Report (CIIR) from TransUnion (NYSE: TRU) reveal that the consumer credit market continues to show resiliency in the face of a challenging economic environment, as consumers continue to turn to credit to help manage the higher costs they are facing.

Despite interest rates that remain persistently high relative to recent history, certain key credit card metrics have seen steady growth in recent years, including total number of bankcards, average new bankcard account credit lines, and the total number of U.S. consumers who carry a bankcard balance.

• As of Q1 2024, consumers hold more than 543 million bankcards in their wallets, a growth of 20 million year-over-year (YoY) and more than 88 million from just three years ago.
• And more consumers are using their available credit line, as the number of consumers who carry a bankcard balance has seen steady growth as well, up 2.2% YoY.
• Average new account credit lines saw YoY growth, up 3.8% to $5,628, in part due to a greater proportion of originations among super prime, for whom new account credit lines tend to be higher.
  

While average new account credit lines saw YoY growth, it is worth noting that total new account credit lines were down 2.6% due to a tightening origination environment.

Consumers have also increasingly turned to unsecured personal loans. Total unsecured personal loan balances have grown 9% YoY to $245 billion in Q1 2024. Unsecured personal loans have also seen growth in the total number of consumers who hold at least one unsecured personal loan, showing an increase of 5% YoY, and 24% since Q1 2021.

“Consumers’ access to credit has grown significantly in recent years and will provide them with credit to tap into when needed,” said Michele Raneri, vice president and head of U.S. research and consulting at TransUnion. “Many of these consumers are choosing to take advantage of these products that can help them manage their rising monthly household expenses, despite the fact that these products may bring with them interest rates that are higher relative to recent history. For these consumers, the short-term pressure of inflation poses a more pressing problem to solve than the potential impact of higher interest rate credit, which includes higher monthly debt service payments.”

Bankcards and Unsecured Personal Loans Continue to See Growth Despite Higher Interest Rates

	Q1 2024		Q1 2023		Q1 2022		Q1 2021
Number of Credit Cards (Bankcards)	543.1 million		523.2 million		490.0 million		455.5 million
Number of Consumers Carrying a Bankcard Balance	169.0 million		165.3 million		158.9 million		150.1 million
Average New Bankcard Account Credit Lines*	$5,628		$5,421		$4,634		$3,811
Total Unsecured Personal Loan Balances	$245 billion		$225 billion		$178 billion		$144 billion
Number of Consumers with Unsecured Personal Loans	23.5 million		22.4 million		20.4 million		19.0 million

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

Delinquencies continue to rise across a number of credit products, with increases seen in credit cards, mortgages, and auto. However, a decrease was seen in unsecured personal loans, largely driven by a shift to lower-risk borrowers, with a year-over-year (YoY) decline in borrower-level delinquency 60 days or more past due (60+ DPD). While last quarter saw delinquencies increase, it is worth noting that we have seen a slowing in the rise in credit card delinquency along with a decline in unsecured personal loan delinquency.

“We have seen delinquencies tick up in recent quarters, which is certainly something lenders need to follow closely. At the same time, the consumer credit market remains resilient given the compounding of relatively high interest rates and persistent inflation,” said Raneri. “The prevailing hope is that as long as unemployment figures remain relatively low, serious delinquency rates may stabilize.” 

To learn more about the latest consumer credit trends, register for the Q1 2024 Quarterly Credit Industry Insights Report webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.

Super prime drives bankcard originations amidst declines overall

Q1 2024 CIIR Credit Card Summary

Bankcard originations were down 6.3% YoY in Q4 2023. This represents two consecutive years of a fourth-quarter YoY decline in originations. At 19.3 million, the origination volume remains 2.3% above 2019 levels, led by super prime, which saw its highest origination volume quarter since 2005. All other risk tiers saw a YoY decline in originations. Total balances increased by 11.3% YoY and remained above $1 trillion for the second consecutive quarter. The prime and below risk segments have held the majority of balances for the past three quarters. Average debt per borrower increased by 8.5% YoY to $6,218. Borrower-level 90+ DPD increased by 29bps YoY to 2.55%, while vintage performance has seen deterioration across all risk tiers.

Instant Analysis

“As consumers manage expenses amidst stubbornly high inflation, demand for credit continues to be strong despite the currently relatively high interest rates. Evidence for this can be seen in the significant bankcard balance growth we are seeing across risk tiers. Delinquencies have increased, however, the growth trend has slowed. Nevertheless, they continue to be worth careful monitoring moving forward. ”

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

Q1 2024 Credit Card Trends

Credit Card Lending Metric (Bankcard)	Q1 2024	Q1 2023	Q1 2022	Q1 2021
Number of Credit Cards (Bankcards)	543.1 million	23.2 million	490.0 million	455.5 million
Borrower-Level Delinquency Rate (90+ DPD)	2.55%	2.26%	1.62%	1.28%
Total Credit Card Balances	$1.02 Trillion	$917 billion	$768 billion	$688 billion
Average Debt Per Borrower	$6,218	$5,733	$5,026	$4,795
Number of Consumers Carrying a Balance	169.0 million	165.3 million	158.9 million	150.1 million
Prior Quarter Originations*	19.3 million	20.6 million	21.2 million	15.0 million
Average New Account Credit Lines*	$5,628	$5,421	$4,634	$3,811

*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 Q1 2024 credit card infographic.

Total unsecured personal loan balances tick up while subprime delinquencies decline

Q1 2024 CIIR Unsecured Personal Loan Summary

Total unsecured personal loan balances grew 9% YoY in Q1 2024. Balance growth was led by super prime, the only tier with double-digit growth. The average account balance increased by nearly 5% YoY to $8,737. Average balance growth was led by subprime, followed by super prime. Balance per consumer also grew by nearly 5% YoY to $11,829. Unsecured personal loan originations were down, at 5 million for Q4 2023. Contraction in originations was seen across all risk tiers with the exception of super prime. Super prime originations grew by 12.6% YoY. Borrower-level 60+ DPD delinquencies fell YoY in Q1 2024, down to 3.75%; however, only subprime declined while all other risk tiers saw increases YoY. On a vintage basis, the delinquency rate for Q1 2023 originations through January 2024 is much lower than for originations for Q1 2022 originations over the same performance period but remains elevated over Q1 2021 originations.

Instant Analysis

“Total balance growth has slowed slightly after three years, with the YoY increase of 9% representing the first quarter since Q4 2021 that saw only a single digit increase in total balances. Unsecured personal loan originations were down slightly YoY as lenders are maintaining tight underwriting standards, focusing on lower risk borrowers. These tighter underwriting standards in recent quarters likely played a role in the YoY decline in overall delinquencies. The originations decline was most pronounced in the subprime segment, which fell nearly 5% YoY.”

- Liz Pagel, senior vice president of consumer lending at TransUnion

Q1 2024 Unsecured Personal Loan Trends

Personal Loan Metric	Q1 2024	Q1 2023	Q1 2022	Q1 2021
Total Balances	$245 billion	$225 billion	$178 billion	$144 billion
Number of Unsecured Personal Loans	28.1 million	26.9 million	23.4 million	20.9 million
Number of Consumers with Unsecured Personal Loans	23.5 million	22.4 million	20.4 million	19.0 million
Borrower-Level Delinquency Rate (60+ DPD)	3.75%	3.91%	3.25%	2.68%
Average Debt Per Borrower	$11,829	$11,281	$9,896	$8,817
Average Account Balance	$8,737	$8,356	$7,448	$6,897
Prior Quarter Originations*	5.0 million	5.2 million	5.7 million	4.2 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 Q1 2024 unsecured personal loan infographic.

Purchase share of mortgage originations hits a record as interest rates remain high

Q1 2024 CIIR Mortgage Loan Summary

Q4 2023 origination volumes were down 11% YoY, with originations continuing to be driven by purchase originations. Mortgage rates set more than a two-decade high during Q4 2023. While overall volumes were down YoY, FHA mortgage originations were up 9% YoY in Q4 2023, the first loan type to register a YoY increase in two years. Delinquencies continue to trend up and are worth continuing to monitor. 60+ DPD consumer-level delinquencies were up to 1.14% in Q1 2024; however, delinquencies still remain below pre-pandemic rates. The 2022 resurgence in home equity lending slowed somewhat in Q4 2023, with HELOCs down 17% and HELOANs down 4% YoY. GenX and Baby Boomers have the highest share of HELOC originations at 39% and 30%, respectively, in Q4 2023. These same generational groups lead the way with 35% and 30% of HELOANs, respectively, during the quarter.

Instant Analysis

“Stubbornly high interest rates continue to suppress the mortgage market, keeping many would-be home-buyers on the sidelines until rates begin dropping. There remains hope that rates will decline over the course of 2024; however, that may happen later than previously anticipated in light of the most recent inflation report. While originations remain down YoY, the rates of decline continue to decelerate, which may be a sign that some consumers are simply tired of waiting. Rising delinquencies are worth paying attention to, though they continue to remain below pre-pandemic levels.”

- Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion

Q1 2024 Mortgage Trends

Mortgage Lending Metric	Q1 2024	Q1 2023	Q1 2022	Q1 2021
Number of Mortgage Loans	53.2 million	52.9 million	51.5 million	50.8 million
Consumer-Level Delinquency Rate (60+ DPD)	1.14%	0.90%	0.80%	0.89%
Prior Quarter Originations*	931,661	1.0 million	2.9 million	4.0 million
Average Loan Amounts of New Mortgage Loans*	$327,102	$327,050	$315,661	$293,901
Average Balance per Consumer	$260,745	$253,514	$241,203	$224,717
Total Balances of All Mortgage Loans	$12.1 trillion	$11.8 trillion	$11.0 trillion	$10.0 trillion

* Originations are viewed one quarter in arrears to account for reporting lag.
Click here for additional mortgage industry metrics. Click here for a Q1 2024 mortgage industry infographic.

Average Auto Monthly Payments Stabilize as Challenges Around Affordability Remain

Q1 2024 CIIR Auto Loan Summary

Q4 2023 saw 5.8 million originations, which is in line with the total one year ago. Originations remain down as compared to 2019 across all risk tiers, with the largest declines seen among below prime risk tiers. The new/used split continues to trend back towards its pre-pandemic norm. As we see inventories continue to build back following the pandemic, leasing for Q1 2024 represented 24% of new vehicle registrations, still well below the 30% seen in Q1 2020, however up from 19% in Q1 2023. The average amount financed, monthly payment, and term length have all remained relatively flat for both new and used vehicles YOY. Account-level 60+ DPD delinquency saw an uptick to 1.33% in Q1 2024.

Instant Analysis

“Affordability continues to pose a challenge for the used vehicle market and, in particular, for below prime consumers, who have seen a buying climate of higher interest rates, increasing lender pullback, and cross-wallet inflation. While some brands continue to see lingering shortages, new vehicle inventories continue to recover from their pandemic-era lows. This has given the leasing market a boost, although leasing still remains well below its pre-pandemic numbers. Higher delinquencies are likely to further constrain loan availability, potentially keeping the market tempered until interest rates begin to see declines.”

- Satyan Merchant, senior vice president, automotive and mortgage business leader at TransUnion

Q1 2024 Auto Loan Trends

Auto Lending Metric	Q1 2024	Q1 2023	Q1 2022	Q1 2021
Total Auto Loan Accounts	80.1 million	80.1 million	80.5 million	82.2 million
Prior Quarter Originations1	5.8 million	5.8 million	6.5 million	6.6 million
Average Monthly Payment NEW2	$744	$741	$657	$588
Average Monthly Payment USED2	$525	$521	$509	$418
Average Balance per Consumer	$24,035	$23,214	$21,606	$20,059
Average Amount Financed on New Auto Loans2	$41,165	$41,547	$40,186	$36,207
Average Amount Financed on Used Auto Loans2	$25,977	$26,260	$27,986	$22,295
Consumer-Level Delinquency Rate (60+ DPD)	1.5%	1.3%	1.1%	1.0%

¹Note: Originations are viewed one quarter in arrears to account for reporting lag.
²Data from S&P Global MobilityAutoCreditInsight, Q1 2024 data only for months of January & February.
Click here for additional auto industry metrics. Click here for a Q1 2024 auto infographic.

For more information about the report, please register for the Q1 2024 Credit Industry Insight Report webinar.

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world.

http://www.transunion.com/business

Contact	Dave Blumberg TransUnion
E-mail	dblumberg@transunion.com
Telephone	312-972-6646

FAQ

How many bankcards are in circulation according to Q1 2024 TransUnion report?

There are 543 million bankcards in circulation as of Q1 2024, marking a growth of 20 million YoY.

What is the average new bankcard account credit line in Q1 2024?

The average new bankcard account credit line increased by 3.8% YoY to $5,628.

What is the total balance of unsecured personal loans in Q1 2024?

The total balance of unsecured personal loans grew 9% YoY to $245 billion in Q1 2024.

How did credit card delinquencies change in Q1 2024?

Credit card delinquencies increased, with borrower-level 90+ DPD rising by 29bps YoY to 2.55%.

What is the state of mortgage originations according to Q1 2024 TransUnion report?

Mortgage originations were down 11% YoY in Q4 2023, impacted by high interest rates.

What are the trends in auto loan delinquencies in Q1 2024?

Auto loan delinquencies saw an increase to 1.33% in Q1 2024.

What was the change in the number of consumers with unsecured personal loans in Q1 2024?

The number of consumers with unsecured personal loans increased by 5% YoY to 23.5 million.

How did average debt per borrower in bankcards change in Q1 2024?

The average debt per borrower in bankcards increased 8.5% YoY to $6,218.