CHICAGO–Despite rising interest rates and the increased prices of goods and services, consumers remain well positioned from a consumer credit perspective, according to TransUnion’s (NYSE: TRU) newly released Q1 2022 Quarterly Credit Industry Insights Report (CIIR).
“While prices are increasing, consumer spend has not yet recovered to the pre-pandemic levels,” TransUnion stated. “The CIIR found that in Q1 2022 the average credit card balance hovered around $5,010. While this was a 4.7% increase over Q1 2021 ($4,784) it still lagged 11% behind the average balance in Q1 2020 ($5,637). Total credit card balances for the industry are $769 billion, which is 5.5% below the $814 billion observed in Q1 2020.”
In addition to consumer spend approaching pre-pandemic levels, consumer liquidity also remains stable, TransUnion reported.
Aggregate excess payment (AEP) – the excess amount a consumer makes over the minimum amounts due on all their credit accounts – is typically an indication of a consumer’s ability to manage their overall debt payments, TransUnion said. In Q1 2022, average AEP was $328, remaining relatively flat from the $326 observed in Q1 2021. The current level remains above the average AEP levels seen pre-pandemic.
Credit Industry Indicator Shows Credit Health Remains High
In another sign that consumer credit health remains healthy, TransUnion pointed to its Credit Industry Indicator (CII), which increased to 116 in Q1 2022 – up from 115 in the previous quarter and 105 one year ago. The CII offers a comprehensive view of consumer credit health, aggregate a comprehensive view of credit data, including supply, demand, usage and performance, to show the overall picture of whether the credit market is improving or deteriorating.
“It also provides a view of the impact of economic market events, including inflation, on consumers, the company said.
In addition to consumer credit health maintaining a healthy level, there has not been a material impact to consumer performance,” TransUnion said. “Serious delinquency rates across mortgage, auto, credit card and personal loans have stayed relatively flat in the wake of expired forbearance programs or rolled back accommodation programs.”
“Consumers are continuing to perform well on their credit and debt obligations – even when faced with several macroeconomic factors that are influencing affordability. Factors such as rising interest rates could affect the monthly payment amounts for some consumers, but we are currently seeing that they are continuing to make payments, sometimes even in excess, of what is required,” said Raneri.
Here’s how TransUnion said product categories performed”
Q1 2022 CIIR Credit Card Summary
For the third consecutive quarter, card origination volumes set an all-time record with 21.5 million new originations in Q4 2021. The total represents a 7% QoQ and 38% YoY increase. This surge was mostly driven by non-prime consumers with the subprime risk tier growing 57.5% and near prime growing 39.8% YoY, TransUnion said.
All other risk tiers exhibited double-digit growth, though at lower percentages. Credit card demand has led to a record 197 million consumers with access to such credit with 159 million of those consumers carrying a balance. Credit lines have also rebounded strongly with total credit lines exceeding $4 trillion for the first time in Q1 2022 and the average new account credit line growing to $4,634 – an increase of 21.6% YoY, the company added.
Q1 2022 CIIR Auto Loan Summary
Dealer inventory continues to remain tight and has been further impacted by international pressures on the supply chain, including the war in Ukraine and COVID-19 lockdowns in China, TransUnion reported.
Origination volumes in Q4 2021 dropped to 6.5 million – a decrease of -3.0% over the same period last year. As a result, available vehicles are moving off dealer lots at a quick rate. These issues have continued to erode vehicle affordability with the average balance of new auto loans reaching $28,415 in Q1 2022 – a YoY increase of 15.2%. This has pushed the average monthly payment of vehicle purchases (including both new and used vehicles) to $458, an increase of approximately $100 over a four year period, according to TransUnion.
Q1 2022 CIIR Personal Loan Summary
The serious delinquency rate (60+DPD) at the borrower level saw an uptick in Q1 2022, increasing from 2.68% to 3.25% YoY. This growth was predominantly due to the growing share of balances held by below prime consumers, according to TransUnion.
“However, delinquency rates remain at healthy levels and are below pre-pandemic highs. Total balances reached a milestone high of $178 billion in Q1 2022 and grew 23.8% YoY, the fastest rate of growth since Q2 2016,” the company said. “This growth was driven by a 12.2% YoY increase to the average balance per consumer, which reached $9,896 in Q1 2022. The number of consumers carrying a balance also grew for the third consecutive quarter (20.4 million) in Q1 2022 – just below the peak of 20.9 million consumers in Q1 2020.”
Q1 2022 CIIR Mortgage Loan Summary
TransUnion noted rising interest rates and limited housing supply have caused the mortgage origination market to slow with volumes declining to 2.9 million originations in Q4 2021 – a -28% YoY decrease but a number still well above the 2.3 million observed pre-pandemic in Q4 2019.
The company further reported rate and term refinance originations dropped dramatically by 58% YoY resulting in the continued increase of purchase share of originations for the third consecutive quarter up from 47% in Q4 2020 to 56% in Q4 2021.
“Tappable home equity, however, continues to grow and reached an all-time high of approximately $20 trillion in Q4 2021. Additionally, homeowners are showing sustained interest in taking advantage of the equity they have built with total home equity originations up 4% YoY and 80% from 2018 to 1.2 million,” TransUnion said. “Within home equity originations, cash-out refinance decreased by only 6% YoY while HELOC grew 31% YoY in Q4 2021 and 13% YoY for a Home Equity Loan. Rising home prices have also pushed the average loan size of new mortgages to $315,543, an increase of 7% YoY.”
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