Thanks to low unemployment, growth in GDP and real disposable income, TransUnion forecasted that consumer credit originations and consumer balances will increase in 2019 for the lion's share of credit products. At the same time, TransUnion said delinquency rates will likely decrease or remain flat, excluding credit cards and mortgages.
In TransUnion's consumer credit forecast report for 2019, the company said an uptick in originations is good news for consumers and lenders. Lenders get to expand their book of business at a time when delinquency rates are low or at normal levels, and lenders have more confidence to take on added risk. For consumers, TransUnion said sub-prime and near-prime borrowers will have access to more credit, providing a mechanism to improve their credit scores. TransUnion noted that it expects the trend of managing risk exposure via loan amount and line management tactics for consumers with lower credit scores to continue next year.
“The consumer credit market has been buoyed by relatively strong macroeconomic factors this year, and our forecast sees more of the same in 2019,” said Matt Komos, vice president of research and consulting for TransUnion, in the report.
There were a few outliers that TransUnion found pertaining to serious credit card delinquency rates and originations and mortgage originations. TransUnion is forecasting credit card delinquency rates to increase to 2.04 percent in the fourth quarter of 2019 compared to 1.94 percent in the fourth quarter of this year. That will likely be the result of a shift toward non-prime credit card holders, which will impact originations and result in an uptick of serious delinquencies. As for mortgage originations, TransUnion is forecasting a decline driven by an increase in interest rates and a low inventory of homes to purchase.
“Everything is relative in consumer credit, and an increase in sub-prime borrowers should not be worrisome at this time," said Komos. "Balancing risk and returns is an instrumental part of consumer lending, and small increases to delinquency rates are often part of the planning process — a normal derivative of granting wider access to credit. Even though it has now been a decade since the last recession, lenders continue to be cautious. In our estimation, the rise in non-prime borrowing we have observed and expect to see next year are a net-net positive."