TransUnion Forecasts U.S. Consumers to Perform Well Again in 2020

Delinquency rates project to perform well even as recent vintages of loans performed worse than previous years. For instance, credit cards originated in 2018 have a delinquency rate of 5.4% nine months after origination compared to 4.49% for those originated in 2017. "As our forecast suggests, credit cards are the one product that will see a slight uptick in delinquency rates," Komos said. However, the overall rate of credit card delinquency still calculates to remain relatively low and much lower than seen during the last recession.

In addition to the strong economy, delinquency rates remained relatively low partly because lenders maintained a balanced approach in their loan offerings. For instance, the share of non-prime borrower originations project to remain relatively steady for most credit products – much lower than observed a decade ago.

TransUnion anticipates total balances for all major credit products to increase for each credit product with unsecured personal loans to grow 11% followed by credit cards (3%), mortgage loans (3%) and auto loans (3%).

Debt consolidation, among the areas cited for potential growth by credit union cited, still looks pretty strong, according to Liz Pagel, senior vice president and TransUnion's consumer lending line of business leader. "We think there is dry powder in the market and as long as the investors are willing to buy this debt and the lenders can continue to fund it, there is room for growth in the market. I think that applies to credit unions as well, seeing how consumers are taking up these loans. The window has not closed for them to get into this market in a meaningful way."

Another trend to watch, Pagel believed, is increasing point of sale lending. "that's where you're checking out with a big-ticket purchase, you're offered either an installment loan on the spot or an extended payment plan that's underwritten." The options for consumers to finance big purchases and small purchases can see that increase.

TransUnion professionals provided analysis of the four 2020 trends to watch:

• Credit card performance to remain strong as delinquency rates flatten. "Originations in the credit card market are expected to slow in 2020, with the majority of growth coming from the non-prime risk tiers," Paul Siegfried, senior vice president and TransUnion's credit card line of business leader, said. However, he maintained, they do not expect the increase in non-prime activity to impact card performance as TransUnion projections have the delinquency rate staying under 2% – well below post-recessionary levels.
• Unsecured personal loan originations will continue to grow in 2020, but at a more sustainable rate compared to recent years. "Loan volumes will remain at healthy levels, as consumers continue to find these loans to be a valuable addition to their wallets," Pagel said. She added, debt consolidation will continue to drive the lion's share of the volume, but as lenders grow faster in the prime and above risk tiers, the home improvement use case will grow as well. "This will lead to higher loan amounts, with total balances expected to reach a high of $180 billion."
• The issues surrounding auto affordability will continue to persist in the coming year, which will lead to a decline in new auto sales. ""The growth pattern of new auto sales will remain concentrated toward prime and above consumers, while the overall growth curve will flatten in 2020 due to declining new vehicle sales. External pressures such as higher gas prices and the looming threat of auto tariffs, combined with rising vehicle prices, are all contributing to the concern of auto affordability," Satyan Merchant, senior vice president and TransUnion's auto line of business leader, said.
• The mortgage affordability concerns of the last few years may start to diminish in 2020. This will create opportunities for a segment where demand is outpacing affordable supply: first-time homebuyers. "Mortgage has remained a largely prime and above product since the recession and as such, we have recently seen historical lows in regard to delinquency. The 2020 of a serious delinquency rate project to continue to follow this trend and remain under 1.5%. "Additionally, the combination of low unemployment, rising wages, low interest rates, and slowing home price appreciation will help affordability," Joe Mellman, senior vice president and TransUnion's mortgage line of business leader, said.

TransUnion's forecasts use various economic assumptions, such as gross domestic product, home prices, personal disposable income and unemployment rates.