TransUnion report confirms credit activity continues to rise from lows in COVID-19 pandemic, original activity is recovering
TransUnion (NYSE: TRU) confirmed that consumer credit activity continues to rise from lows in the COVID-19 pandemic, but some areas like auto loan (subprime) performance have lagged behind.
As noted in an update posted on February 18, 2021 by TransUnion, the company’s Q4 2020 Industry Insights report examines recent consumer credit trends.
Consumer credit activity began to recover in the last quarter of 2020 as balances started to increase in most credit products and origination activity recovered from early lows. pandemic, TransUnion revealed.
TransUnion’s fourth quarter 2020 report also noted that subprime borrowers have generally followed the general market trend, although activity for that particular group has “decelerated in the auto loan business.”
Matt Komos, Vice President of Research and Consulting at TransUnion, said:
“At first glance, the consumer credit market is doing quite well. Serious delinquency levels remain near record lows as payroll and origination activity resumes. Further stimulus and flattening unemployment rates indicate a continuation of this trend. However, the performance of these accounts still in hosting will help shape the true image of consumer credit. With many accounts slated to go out of hosting between March and May, including mortgage accounts, we will soon see the real impact of these programs for both consumers and the credit market. “
Although installments (measured by a quarter of arrears) have increased in the mortgage sector (increasing by 67% between the third quarter of 2020 and the third quarter of 2019), this performance is an “aberration” in the credit market at consumption, adds the report.
The report also mentions that low interest rates and “increased demand for housing” have managed to “propel” mortgage demand disproportionately. But the credit card and personal loan origination business has declined by about 30% over the past year. For credit cards and personal loans, the “delay in subprime borrowing mirrored the broader market,” the TransUnion report revealed.
The report further notes that auto loans have “experienced a different phenomenon in which overall third-quarter 2020 mountings have almost returned to third-quarter 2019 levels, although mountings to subprime auto loan borrowers have lagged behind. – down by around 21% ”.
Satyan merchant, Senior Vice President and Automotive Business Leader at TransUnion, noted:
“A tightening of auto loan standards would generally be the main reason for such a rapid decline in subprime origination activity. We have conducted a more in-depth analysis which shows that in this case it could be a combination of delay in consumer demand and adjustments in lending criteria. This revelation highlights the disproportionate economic impacts that some at-risk borrowers are feeling as a result of COVID-19. “
The report adds that unsecured personal loan lenders remain fairly cautious as third quarter 2020 originations were 30.7% lower than the previous year, but managed to grow “strongly quarter to quarter.” ‘other, indicating a gradual increase in volume “.
The report further notes:
“Serious default rates edged up 15 basis points (bps) in the fourth quarter of 2020 on a quarterly basis, while remaining 78 basis points lower than in the fourth quarter of 2019. The relatively low level of lending resulted in a further decline in balances in the fourth quarter of 2020 to $ 148 billion, and consumers with balances totaling 19.2 million – a decrease of 7.8% and 7.3% from the previous year, respectively. The continued availability of lender hardship programs, in addition to moratoriums on evictions and declining consumer spending, has helped keep defaults and new chargebacks low. “
(Note: you can view the full report here.)