Consumers lean on unsecured debt as cost of living bites, reports TransUnion

Bank card and personal loan balances rise 15% while mortgage originations tumble.

Higher interest rates and inflation have pushed household budgets to beyond their limits, forcing many American consumers to take on more debt.

New stats from TransUnion show that bank card balances were up 15% in the third quarter of 2023 compared to a year earlier, with a new record high of $995 billion, with millennials overtaking boomers as the second biggest bank card credit users behind Gen Xers.

The average bank card balance per consumer reached its highest level in ten years at $6,088, an 11% increase year-over-year, while total bank card credit lines increased 9% to $4.6 trillion while the average credit line per consumer has surpassed the $25,000 mark.

Average bank card utilization was 24.1%, below the pre-pandemic level of 24.6% seen in Q3 2019. However there was a slight increase in past-due levels of 90 or more days to 1.91%, up 30 basis points from Q3 2019.

New bank card originations were down almost 4% year-over-year to 20.5 million.

“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,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion. “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.

TransUnion’s Credit Industry Insights Report also shows a 14.8% increase in unsecured personal loan balances year-over-year, ending Q3 2023 at $241 billion, the eighth consecutive quarterly record.

The average balance per consumer for these credit products grew nearly 9% year-over-year to $11,692, another record high, and the number of consumers with a balance grew to 23 million in Q3 2023, an increase of 5%.

“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,” said Liz Pagel, senior vice president of consumer lending at TransUnion.

MORTGAGE ORIGINATIONS

Mortgages (up 3.2% to $11.8 trillion) and auto loans (up 5.2% to $1.6 trillion) saw more modest rises in balances.

Mortgages also posted a significant decrease in new originations, down 36.5% year-over-year, with would-be buyers constrained by high prices, low supply, and higher rates.

The report also highlights some continuing concern about loan performance.

“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,” said Joe Mellman, senior vice president and mortgage business leader at TransUnion. “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.”