PROVIDENCE – Demand for consumer credit is expected to rise next year, while serious payment delinquency rates will likely decline or remain steady, according to a market forecast by consumer credit reporting agency TransUnion.
Consumer credit originations and balances are expected to increase for most credit products in 2019. Low unemployment rates and continued growth in both the gross domestic product and real disposable income are among the key drivers expected to propel the U.S. credit market, the agency found.
“Consumer demand for both personal loans and auto loans is expected to remain high, and lenders are expected to continue looking to expand their books of business by providing more subprime and near-prime borrowers with loans,” said TransUnion Vice President of Research and Consulting Matt Komos.
“This is a positive for both lenders and consumers,” he added. “Delinquency rates remain at either low or ‘normal’ levels, and lenders have confidence to open up their portfolios to slightly more risk.”
From a consumer perspective, subprime and near-prime borrowers seeking new credit should have more opportunities to show that they can responsibly manage their payments, Komos said.
However, the forecast states, the percentage of subprime borrowers originating loans remains far below what was seen at the onset of the last recession nearly a decade ago. In 2007, for instance, the percentage of subprime borrowers originating loans for key credit products included 20 percent for auto; 25 percent for credit cards; 9 percent for mortgage; and 39 percent for unsecured personal loans.
With subprime lending on the rise, Komos noted that small increases to delinquency rates are often part of the planning process for lenders, who overall continue to be cautious.
“In our estimation,” he added, “the rise in non-prime borrowing we have observed and expect to see next year are a net-net positive.”
Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.
