Credit Balances On The Rise As Consumers Manage Higher Costs
High interest rates and higher-than-expected costs for goods and services continue to squeeze the wallets of American consumers. This has led to many – continuing to leverage their existing credit account lines more than ever.
At the same time, affordability challenges for homes and automobiles, as well as growing concerns over rising debt service costs, have resulted in consumers opening fewer new credit accounts. These findings were revealed in the newly released Q3 2023 Quarterly Credit Industry Insights Report (CIIR) from TransUnion (NYSE: TRU).
Bankcard balances have increased 15% year-over-year (YoY) to set a new record at $995 billion at the end of Q3 2023, up from $866 billion one year prior. Of particular note is the balance share of Millennials, which now has surpassed that of Baby Boomers as the second greatest balance share of any generation, only behind Gen X. The average balance per consumer also increased by double-digits YoY, up 11%, to $6,088. This represents the highest average balance per consumer in the last ten years.
“Inflation has abated to a large extent in recent months, but its elevated levels in 2021 – 2022 have left overall prices sharply higher across a wide range of products and services – not just discretionary spend categories, but everyday items that consumers rely on,” said Charlie Wise, senior vice president of global research and consulting at TransUnion. “As a result, consumers have increasingly turned to their existing available credit lines. It will be worth watching how those balances are further impacted as some consumers begin feeling the pinch of the resumption of student loan payments.”
Conversely, while balances across many credit products are higher YoY, originations for those same credit products lagged behind the levels that they were at one year ago. Mortgage originations lead the decline, down nearly 37% YoY, as potential home buyers continued to hold-off in the face of high interest rates and home prices, which show no sign of dropping in the near future, and the refinance market remains on the sidelines for now. Unsecured personal loan originations were also down significantly YoY from the record levels in 2022, down nearly 15%, as lenders have increasingly focused on less risky credit tiers when considering new unsecured personal loan originations.
Balances Were Up While Originations Were Down Across Credit Products YoY
| Key Metrics | Q3 2023 | Q3 2022 | YoY% Change |
| Total Credit Card Balances (Bankcard) | $995 billion | $866 billion | 15.0% |
| Total Mortgage Balances | $11.8 trillion | $11.5 trillion | 3.2% |
| Total Auto Balances | $1.6 trillion | $1.5 trillion | 5.2% |
| Total Unsecured Personal Loan Balances | $241 billion | $210 billion | 14.8% |
| Q2 2023 | Q2 2022 | YoY% Change | |
| Total Credit Card Originations1 (Bankcard) | 20.5 million | 21.3 million | -3.8% |
| Total Mortgage Originations1 | 1.2 million | 1.9 million | -36.5% |
| Total Auto Originations1,2 | 6.3 million | 6.9 million | -8.7% |
| Total Unsecured Personal Loan Originations1 | 5.1 million | 6.0 million | -14.5% |
1Note: Originations are viewed one quarter in arrears to account for reporting lag.
2TU discovered irregularities from a data contributor, and that data has been removed from our market reporting until resolution.
The report also found lenders have continued to look to less risky credit tiers when considering new originations, in response to rising delinquencies for unsecured products that began in mid-2021. For instance, among bankcard originations in Q2 2023, the super prime share was 22.5%, up from 18.6% in Q2 2022. This stands in contrast to the subprime segment share, which fell from 24.1% in Q2 2022 to 20.7% in Q2 2023. A similar story can be seen when looking at unsecured personal loans, where subprime’s share of originations in Q2 2023 fell to 36%, down from 39.5% one year prior, while super prime (7.9%, up from 5.6%) and prime plus (11.6%, up from 10.4%) both grew over the same period.
Bankcard balances reach a new record while balance-level delinquencies rise
Q3 2023 CIIR Credit Card Summary
Bankcard originations saw their second highest Q2 ever in Q2 2023 with 20.5 million new accounts, representing a decline of 3.8% YoY from the record levels in 2022. This decline was primarily driven by lower originations in prime and below segments. Total bankcard balances reached a new record of $995 billion in Q3 2023, which represented YoY growth of 15%. The average bankcard balance per consumer increased 11% YoY to $6,088, the highest in the last 10 years. Total bankcard credit lines increased 9% YoY to $4.6T while the average credit line per consumer has surpassed the $25K mark. Average bankcard utilization per consumer in Q3 2023 stood at 24.1%, below the Q3 2019 pre-pandemic level of 24.6%. 90 or more days-past-due (DPD) balance-level delinquency saw an increase of 65bps YoY to 1.91%, 30bps higher than the pre-pandemic Q3 2019.
Instant Analysis
“Q2 2023 showed another historically strong quarter for bankcard originations, though lower than last year’s record level, as lender acquisition strategies shifted away from below prime originations for the third consecutive quarter. In contrast, the bankcard origination share for prime plus and super prime are up from one year ago, indicating a shift by lenders to focus on acquiring lower risk new accounts. Despite the year-over-year drop, near-record origination levels show that card issuers have continued to meet the demand of credit-seeking borrowers. While still reflecting some familiar seasonal patterns, balance-level bankcard 90+ DPD delinquency now stands at its highest level over the past decade, and bears continued monitoring.”
– Paul Siegfried, senior vice president and credit card business leader at TransUnion
Q3 2023 Credit Card Trends
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Super prime leads unsecured personal loan balance growth as delinquencies tick down
Q3 2023 CIIR Personal Loan Summary
Total unsecured loan balances set a new record for the 8th consecutive quarter, growing to $241 billion in Q3 2023, representing YoY growth of nearly 15%. Super prime experienced the most significant YoY balance growth of 38.6%, followed by subprime and prime plus at 15% and 14%, respectively. Total new account balances in Q2 2022 were at $35 billion, down 13% YoY. Only the super prime risk tier grew YoY (22%). The average balance per consumer grew nearly 9% YoY to $11,692, another record high, and the number of consumers with a balance grew to 23 million in Q3 2023, a YoY increase of 5%. On the origination front, Q2 2023 marked the third consecutive quarter of YoY decline (15%); however, this level remained 6% higher than pre-pandemic Q2 2019. All risk tiers saw YoY declines except for super prime, which grew nearly 20%. Borrower-level 60+ DPD delinquency was 3.8% in Q3 2023, down from 3.9% a year prior. On a vintage basis, delinquencies for below prime vintages for Q3 2022 originations after 12 months have stabilized compared to 12-month performance for the Q3 2021 origination cohorts, while delinquencies for prime and above vintages originated in Q3 2022 are elevated over the prior year.
Instant Analysis
“Although originations continue to fall from 2022’s record levels, total unsecured loan balances and consumer-level balances still reached records, driven primarily by super prime consumers, representing a continued shift by lenders towards less risky borrowers. While originations in Q2 2023 were down 14.5% from last year, they remain elevated compared to the pre-pandemic period, demonstrating continued demand in this market. 60+ DPD delinquencies saw their first year-over-year decline in borrower-level delinquency in over a year, led by improvement in the performance of originations by below prime borrowers. This is something worth watching in the months to come as we look for potential impacts of the restarting of student loan payments for millions of borrowers. Lenders should continue to find opportunities given strong employment rates and a continued desire by consumers to refinance higher interest card debt.”
Q3 2023 Unsecured Personal Loan Trends
*Note: Originations are viewed one quarter in arrears to account for reporting lag.
Mortgage balances inch higher while delinquencies continue to trend up
Q3 2023 CIIR Mortgage Loan Summary
After falling slightly last quarter to $11.7T, total mortgage balances increased to $11.8T in Q3 2023. This represents an increase of 3% YoY. Mortgage originations were down 37% YoY, falling to 1.2 million, comparable to volumes last seen in Q2 2014. Purchases made up 87% of the volume in Q2 2023, at 1.0 million originations, down 28% YoY from 1.2 million in Q2 2022. Refinance was down 64% YoY from 425K to 151K, with rate and term and cash-out refinance originations falling 63% and 65% YoY respectively. Tappable homeowner equity continued to inch upward, up 1% YoY to $19.7T. HELOC originations were down 28% from last year’s high volumes, and Home Equity loan originations were down slightly by 3% YoY. Despite these dips, with originations in Q2 2023 at 295K and 290K for HELOCs and home equity loans, respectively, volumes were well above levels seen between 2008 and 2021. While still below Q3 2019 pre-pandemic levels, mortgage account-level delinquencies (60+ DPD) were up 15% YoY to 1.02%. This marks thesixth consecutive quarter of increases, though delinquency levels remain controlled by historical standards.
Instant Analysis
“Following a period of historically low account delinquencies, delinquencies have seen six consecutive quarters of YoY increases – inching them closer to pre-pandemic levels. Delinquencies increased across all stages (early, mid and late) and all loan types. Vintage performance, which reflects the performance of an account in different periods after the loan was granted, shows deterioration in more recent originations. New mortgage vintages are performing worse than vintages of the past four years. In the midst of increasing non-mortgage debt and rising delinquencies across the board, the record levels of equity available to homeowners will remain a viable solution to ease debt pressures.”
– Joe Mellman, senior vice president and mortgage business leader at TransUnion
Q3 2023 Mortgage Trends
* Originations are viewed one quarter in arrears to account for reporting lag.
New vs. used auto originations continue to revert toward pre-pandemic norms while monthly payments stabilize
Q3 2023 CIIR Auto Loan Summary
Originations in Q2 2023 were down 9% YoY to 6.3 million while at the same time experiencing a slight seasonal uptick of 4.6% over the previous quarter. For the second consecutive quarter, originations were down across most risk tiers YoY, with only super prime showing a YoY gain of 5.8%. Subprime and near-prime originations continue to be the most suppressed, down 15.2% YoY. The new vs. used split continues to trend back towards pre-pandemic norms, with new cars making up 43% of all cars financed in Q3 2023, up from 39% of all cars one year prior. Average amounts financed for new vehicles saw a YoY decline of 2.6% YoY, while used saw a YoY decline of 4.8%. Monthly payments are up for used vehicles (1.3%) and new vehicles (4.2%) YoY; however, QoQ monthly payments held relatively flat among used car purchases and saw a modest decline among new car purchases. Leasing market share currently stands at 21% of new vehicle registrations, up from its 2022 low of 17% but still below its pre-pandemic level of ~30%. Point in time 60+ DPD account delinquency increased to 1.35% in Q3 2023, up from 1.19% in Q3 2022. Vintages continue to show performance similar to 2021 cohorts. Early 2022 cohorts looked materially worse, but an early look at the performance of Q1 2023 originations shows slight improvement over a year prior.
Instant Analysis
“The new vehicle market has improved; however, recent events, including the United Auto Workers strike, could impact continued growth due to consumer perception and inventory of certain vehicle models. High interest rates continue to help drive up monthly payments for both used and new vehicles. As interest rates and cross-wallet inflation are likely to remain relatively high for at least a while longer, affordability will continue to be challenging,
particularly among below-prime consumers. Lenders’ close eye on portfolio delinquency and macroeconomic indicators will likely determine if/when underwriters expand their buy boxes to riskier borrowers.”
– Satyan Merchant, senior vice president and automotive business leader at TransUnion
Q3 2023 Auto Loan Trends
| Auto Lending Metric | Q3 2023 | Q3 2022 | Q3 2021 | Q3 2020 |
| Total Auto Loan Accounts | 80.4 million | 80.2 million | 82.0 million | 82.6 million |
| Prior Quarter Originations1,3 | 6.3 million | 6.9 million | 8.2 million | 6.4 million |
| Average Monthly Payment NEW2 | $737 | $707 | $630 | $575 |
| Average Monthly Payment USED2 | $537 | $529 | $476 | $401 |
| Average Balance per Consumer3 | $23,809 | $22,642 | $20,997 | $19,699 |
| Average Amount Financed on New Auto Loans2 | $40,792 | $41,872 | $38,686 | $35,474 |
| Average Amount Financed on Used Auto Loans2 | $27,036 | $28,405 | $26,265 | $21,446 |
| Consumer-Level Delinquency Rate (60+ DPD)3 | 1.53% | 1.29% | 0.86% | 0.99% |
1Note: Originations are viewed one quarter in arrears to account for reporting lag.
2Data from S&P Global MobilityAutoCreditInsight, Q3 2023 data only for months of July & August.
3TU discovered irregularities from a data contributor, and that data has been removed from our market reporting until resolution.
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