Consumers Poised for Continued Strong Credit Activity

TransUnion, Chicago, said its quarterly Industry Insights Report points to several factors that portend good things for retailers this holiday season.

The report said these dynamics include a reversal in private label card originations to the positive side–spurred by lower-risk borrowers–and the ability of consumers in recent years to pay down more of their holiday credit card debt. This is all occurring against the backdrop of a consumer credit market that continues to perform within expectations.

TransUnion said the number of consumers with access to revolving credit now stands at a record high 200.5 million consumers as of the third quarter, up from 198.0 million a year ago. On average, bank-issued credit card balances for individuals have grown to $5,668, while private label average card balances, per individual, grew to $2,022.

“Overall, the consumer credit market is performing well, with delinquency rates declining in the last year for both mortgages and unsecured personal loans. While serious delinquencies have risen slightly for auto loans and credit cards, they still remain at ‘normal’ levels,” said Matt Komos, vice president of research and consulting at TransUnion. “From a credit card perspective, it’s interesting to see private label card originations grow on a year-over-year basis for the first time in 2 ½ years. This fact, combined with low unemployment, high consumer sentiment and recent strong pay-down activity on credit card balances, indicates that retailers may be beneficiaries this holiday season.”

The report said total unsecured balances in third quarter increased to a record high $156 billion. The average balance per consumer also continued to rise, growing 7.9% year-over-year to reach $8,998 in Q3. While balances continue to grow, performance remains solid as delinquencies declined to 3.28% in Q3 from 3.41% a year ago.

“The consumer lending market has maintained healthy growth,” said Liz Pagel, senior vice president and consumer lending business leader with TransUnion. “Delinquencies continue to decline while balances are growing, which is a great combination. Throughout 2018 the consumer lending market experienced unprecedented double-digit origination growth, but this year we have seen the growth slow to a more sustainable high single digit growth rate. Current growth rates and performance markers are a good indication of the expected market behavior through the rest of the year and into 2020.”

TransUnion said mortgage performance continues to stay strong as delinquencies remain near record lows. Year-over-year consumer delinquencies decreased from 1.65% in Q3 2018 to 1.51% in Q3 2019. Q2 originations grew 12% year over year to 2.1 million. Average new account balances also grew during this period at 10% year over year.

“It’s noteworthy that many of the more expensive MSAs experienced significant year-over-year origination growth in Q2,” said Joe Mellman, senior vice president and mortgage business leader with TransUnion. “Of the top 20 MSAs, those with an average new account balance greater than $300K experienced origination growth of 20% year-over-year, while those MSAs with an average new account balance less than $300K experienced origination growth of only 13% year-over-year.  Looking forward we expect refinance activity to drive origination growth, riding the availability of low interest rates.”