CHICAGO–TransUnion has released new data around how credit union members are reacting to high inflation and pressure on their monthly budgets, including by making minimum-only payments on cards.
“Credit union members are facing many of the same inflation-driven economic challenges as the overarching market,” said Sean Flynn, senior director of community financial institutions at TransUnion. “As a result, credit unions are seeing increased balances across the board when looking at credit cards, auto loans, mortgages, HELOCs and personal loans. HELOCs, and personal loans are seeing particularly high balance growth, up more than 39% and nearly 26% respectively year-over-year (YoY).”
According to TransUnion, while balances have increased among each of the aforementioned product lines, it’s “more of a mixed bag” when it comes to originations.
The company said its data show originations from Q4 2022, the most recent quarter available for origination data, were generally flat for bankcard and auto loans, while they were down 33% YoY for mortgages. HELOCs and personal loans, on the other hand, saw YoY increases.
Tapping Home Equity
The 13% YoY growth in HELOC originations indicates that, in the face of increasingly high interest rates, credit union members are electing to tap into their home equity to help pay down higher interest debt, TransUnion said. Similarly, many credit union members likely sought personal loans, up 12% YoY, to consolidate higher interest debt.
“Credit unions appear to be really focused on serving member needs wherever they can,” said Flynn. “While auto loan and bankcard originations were down for the whole industry in Q4 2022, among credit unions they remained relatively flat. Additionally, credit unions continue to remain a lower-rate alternative when it comes to personal loans, growing those originations by 12% at a time when other lenders saw significantly less growth.”
More Minimum Payments Made
As interest rates and prices continue to rise, fewer consumers are making payments above and beyond their minimum monthly payments, the TransUnion analysis reveals.
“This bears careful attention as recent TransUnion research has shown that excess payments above minimum balances due have proven effective as proxy measures to consumer liquidity, typically dropping significantly anywhere from six to 12 months prior to a serious delinquency event,” the company said.
In addition, TransUnion said serious delinquency rates remained generally stable among credit unions quarter-over-quarter (QoQ), with 60 DPD+ delinquency rates coming in at 0.79% in Q1 2023, seasonally down from 0.83% in Q4 2022. 60+ DPD delinquency was up YoY from 0.50% in Q1 2022.
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