CHICAGO–A new forecast for 2023 from TransUnion is predicting that after two years of aggressive loan growth, particularly for credit cards and personal loans, and serious delinquency rates that generally remained near pre-pandemic levels, the consumer credit market will experience more pronounced changes.
TransUnion’s 2023 Consumer Credit Forecast is projecting delinquency rates for credit card and personal loans to rise to levels not seen since 2010, while at the same time, demand for most lending products will remain high relative to pre-pandemic levels, with the number of consumers securing auto and home equity loans increasing on an annual basis.
Despite a challenging macroeconomic environment, TransUnion noted its new Consumer Pulse study found that more than half (52%) of Americans are optimistic about their financial future during the next 12 months. The youngest generations – Millennials (64%) and Gen Z (61%) – are most optimistic, TransUnion stated, adding the optimism levels are occurring against a backdrop wherein 82% of consumers believe the U.S. is currently in or will be in a recession before the end of 2023.
‘Significant Challenges’
“Rapidly increasing interest rates and stubbornly high inflation combined with recession fears represent the latest in a series of significant challenges consumers have faced in recent years. It’s not surprising then to see pronounced increases in delinquency rates for credit card and personal loans, two of the more popular credit products,” Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, said in a statement. “Yet, many consumers – from a credit perspective – are in a better position than they were just a few years ago, equipped with credit they can use in case of more macroeconomic challenges. We expect demand for credit to continue to be high with lenders positioned well to meet it. While unemployment is likely to rise next year, it should remain relatively low, a key element for a healthy consumer credit market.”
Room for Optimism
According to TransUnion, the forecast found that there is room for optimism with auto loan and home equity originations expected to rise next year.
“While credit card originations are expected to drop from 87.5 million in 2022 to 80.9 million in 2023, the number of new cards opened will remain much higher than at any time in the last decade,” TransUnion stated.
About one in four Americans (26%) surveyed in the Consumer Pulse study reported plans to seek new credit or refinance in the next year. Of those, 53% plan to apply for a credit card, more than double all other credit types; car loan/lease (23%), personal loan (22%), mortgage (17%), new HELOC (14%) and refinance mortgage (14%), TransUnion said.
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