Heading into the new year, it appears that the credit market will be in good shape, according to the TransUnion 2020 Credit Forecast.
Among the findings, TransUnion reports that serious delinquency rates will either drop or remain stable for auto loans, credit cards, mortgages and unsecured personal loans.
“The U.S. consumer is as strong as ever, and TransUnion expects more of the same in 2020,” said Matt Komos, vice president of research and consulting for TransUnion’s financial services business unit in a news release. “More consumers are securing loans and increasing their balances in a measured manner, all while maintaining historically low delinquency levels. Low unemployment rates, continued wage growth and an overall sound economy are making this positive performance hold true. As it’s anticipated that these positive economic trends will continue in 2020, TransUnion expects the healthy consumer credit market to continue in 2020 as well.”
Factors influencing the positive trends for credit activity include low unemployment rates, continued growth in the GDP and strong consumer confidence.
“The U.S. consumer credit market has now grown every year since the Great Recession concluded in 2009, marking one of the longest economic expansions in U.S. history,” according to TransUnion.
Key findings in the 2020 Credit Forecast include:
- Delinquency rates are expected to remain low overall, except for credit cards. For example, credit cards in 2017 had a delinquency rate of 4.49% nine months after origination; compared to 5.4% within ninth months of origination in 2018.
“As our forecast suggests, credit cards are the one product that will see a slight uptick in delinquency rates. However, the overall rate of credit card delinquency is still expected to remain relatively low and much lower than what was seen during the last recession,” Komos said.
- The low delinquency rates continue has been sustained by several key economic indicators. “For instance, the unemployment rate stands at 3.6% through November 2019, and it’s expected to increase marginally to 3.8% by the end of 2020. Real disposable income is expected to continue growing at 2.0% in 2020, compared to 2.4% growth in 2019 and 2.8% growth in 2018. GDP is expected grow 1.6% in 2020 compared to 2.2% in 2019 and 3.1% in 2018,” TransUnion reports.
- Total balances for all major credit products are also expected to rise for unsecured personal loans, credit cards, mortgages and auto loans. Credit card balances are expected to increase by about 4 % and end at $864 billion in 2020.
Infographic Source: TransUnion