Anticipating Future Fed Interest Rate Cuts, Consumers Continue to Use Existing Credit, Gain Access to New Lines

Key findings include:

· Unsecured personal loan balance growth continued in Q2 2024, albeit at a more moderated pace. While it was the seventh consecutive quarter of balance growth, YoY growth was only 6%, down from the double-digit growth seen at its peak. Originations saw YoY growth for the first time in five quarters in Q1 2024 (the most recent quarter for which originations data are available).Growth was led by super prime and near prime, at 12% and 10% YoY growth respectively, and all risk tiers except prime plus seeing growth.

· Bank card balances grew 4.8% YoY led by subprime at 12.3% growth. All risk tiers saw growth YoY. Card originations were down 7% YoY in Q1 2024. However, super prime saw growth YoY.

· It's a similar story with auto, with originations down YoY in Q1 2024, with the exception of super prime. Among the super prime risk tier, originations were up 10.3% YoY in Q1 2024. Balances grew 2.7% YoY, primarily behind growth among the subprime (9.8%) and super prime (7.9%) risk tiers.

· Mortgage originations saw YoY growth in Q1 2024, which represents the first YoY growth since 2021. The growth was headlined by growth on both ends of the credit risk spectrum, with subprime up 15.7% YoY and super prime up 12.1% over that time.

Raneri added, "It remains to be seen how these numbers will change if and when the Fed lowers interest rates later this year. For consumers, the best thing that they can do is ensure that their credit is in the best position possible when that time comes in hopes of being able to take advantage of those lower rates."

To learn more about the latest consumer credit trends, register for the Q2 2024 Quarterly Credit Industry Insights Report webinar. Read on for more specific insights about credit cards, personal loans, auto loans and mortgages.

Balances and accounts rise YoY as consumers continue to turn to cards

Q2 2024 CIIR Credit Card Summary

The total number of credit cards topped 545 million in Q2 2024 as consumers continued to turn to cards to help manage in this challenging economic environment. Similarly, balances continued to grow (up 8.6% YoY) albeit at a lower rate than previously. This follows a period of consistent double-digit YoY percentage increases. Total balances remained above one trillion for the third consecutive quarter, at $1.05 trillion. Borrower-level delinquencies measured as 90 or more days past due (90+ DPD) increased by 20bps YoY to 2.26%; however, the YoY increase between 2023 and 2024 was significantly less than the 49bps YoY increase between 2022 and 2023. Bankcard originations declined 7% YoY, marking the fourth consecutive quarter of YoY declines. Generationally, 19% of all originations were attributed to Gen Z, up 2% YoY, and the only generation that saw a YoY increase in share.

Instant Analysis

"A more pronounced divergence appears to be occurring when it comes to how different consumer segments are faring in this economic environment, and in particular, how they are using their credit cards. Higher-risk prime and below segments seem to be experiencing more significant inflationary pressures and as such, relying on their cards more, evident in increasing balances and higher utilization. Originations will likely continue to decline for mid-tier and worse consumers as issuers look to less risky borrowers. We expect delinquency rates to continue to rise, though the growth rate should decelerate."

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

Q2 2024 Credit Card Trends

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

Click herefor a Q2 2024 credit card infographic. For more credit card industry information, click herefor episodes of Extra Credit: A Card and Banking Podcast by TransUnion.

Rise in originations helps unsecured personal loans to new record balance

Q2 2024 CIIR Unsecured Personal Loan Summary

After five consecutive quarters of YoY originations declines, unsecured personal loan originations were up 7% YoY in Q1 2024 to 4.6 million. Almost all risk tiers, except for prime plus, contributed to the growth in originations, led by super prime and near prime. Q2 2024 represented the 12^th consecutive quarter of YoY growth in total balances. However, for the 7^th consecutive quarter, that YoY balance growth was at a slower rate than the quarter before, with growth of 6% to $246 billion. Total new account balance for Q1 2024 fell 10% YoY to $27 billion, while the average balance per consumer saw a small growth of 1.2% YoY in Q2 2024. Total number of consumers with a balance grew YoY for the 11^th consecutive quarter, reaching 23.9 million. Consumer-level 60+ DPD delinquencies fell to 3.4% in Q2 2024. This was led by subprime, which saw a decline of nearly 7% YoY in Q2 2024.

Instant Analysis

"Super prime lending largely fueled the new record in balances and contributed to the first YoY quarter of origination growth in five quarters, although total new account balances were lower in aggregate. Delinquency numbers continued to improve for the second consecutive quarter, driven by lower subprime borrower delinquencies. We are seeing FinTech activity in the unsecured personal loans market returning to levels seen in previous years. It will be worth watching to see if FinTechs, and other lenders, are positioning themselves to take advantage of likely Federal Reserve rate cuts later in 2024."

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

Q2 2024 Unsecured Personal Loan Trends

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

Click herefor additional unsecured personal loan industry metrics. Click herefor a Q2 2024 unsecured personal loan infographic.

Mortgage originations up YoY for the first time since 2021

Q2 2024 CIIR Mortgage Loan Summary

Q1 2024 origination volumes increased by 2% YoY to 915K. This represents the first YoY increase in originations since 2021. Generationally, Gen Z saw an increase in share of mortgage originations, up from 12.4% in Q1 2023 to 14.9% in Q1 2024, the only generation to see a share increase over the period. Purchase originations fell 1% YoY, although did account for 84% of all originations in Q1 2024. Delinquencies continued to trend upward, with consumer level 60+ DPD delinquencies up to 1.12% in Q2 2024, up from 0.89% in Q2 2023. FHA loans maintained the majority share of delinquent accounts. The Q2 2023 vintage is underperforming earlier vintages at 12 months after origination. Home equity originations were down 4% YoY to 472K in Q1 2024. HELOC originations fell 7% YoY to 234K in Q1 2024, which marked the fifth consecutive quarter of YoY declines. HELOAN originations fell 1% YoY top 237K in Q1 2024.

Instant Analysis

"After reaching two-decade highs in 2023, mortgage rates have moderated slightly over the first half of 2024, a likely factor in the modest originations gains referenced above. With a contracting monetary policy anticipated in the second half of 2024 due to easing inflationary pressure, mortgage rates are expected to decline further by the end of the year, which could further stimulate the mortgage market. Delinquencies continued to trend up in Q2, marking the ninth consecutive quarter of annual increases - and is a trend to continue to monitor in the coming quarters."

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

Q2 2024 Mortgage Trends

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

Click herefor additional mortgage industry metrics. Click herefor a Q2 2024 mortgage industry infographic.

Average monthly auto payments down slightly YoY while delinquencies tick up

Q2 2024 CIIR Auto Loan Summary

Originations for Q1 2024 were at 6 million, which was down 0.4% YoY. Originations were down across all risk tiers with the exception of super prime, which was up 10.3% YoY. The new/used vehicle origination distribution continues to trend toward pre-pandemic ratios, with 40% of vehicles financed new as opposed to 60% used in Q1 2024. This compares to 41% new and 59% used in pre-pandemic Q1 2019. Total auto finance balances stood at $1.6 trillion in Q2 2024, up 2.7% YoY. The average amount financed in Q2 2024 was down 3.7% for used vehicles, although the amount remained flat for new. Average monthly payments were down slightly for both new (-0.5%) and used (-1.5%) YoY, likely due in large part to vehicle price stabilization. 60+ DPD consumer-level delinquency was up slightly YoY to 1.4%. New vintages from 2023 continued to show consistent performance when compared to the pre-pandemic periods of 2018/2019 while 2023 used vintages were slightly improved compared to the 2022 cohort, but remained worse than 2018/2019 vintages.

Instant Analysis

"While originations remained down YoY, the fact that they were up significantly among super prime is a sign that increased inventories and price declines have gotten lower-risk borrowers off the sidelines and into the market. Subprime continued to see the most significant challenges, likely due to affordability concerns, with originations down 27.4% from Q1 2019 levels. Price stabilization has led to monthly payments remaining relatively flat YoY. Higher delinquencies are worth watching, and they are impacting loan availability at this time. Potential for rate declines, coupled with more normal inventory levels and reduced prices could provide relief to consumers in this market."

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

Q2 2024 Auto Loan Trends

¹Note: Originations are viewed one quarter in arrears to account for reporting lag.

²Data from S&P Global MobilityAutoCreditInsight, Q2 2024 data only for months of April & May.

Click herefor a Q2 2024 auto industry infographic.

For more information about the report, please register for the Q2 2024 Credit Industry Insight Report webinar.

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