According to TransUnion, the consumer credit market will continue to be strong in 2018, reaching a mortgage loan delinquency rate that is the lowest since the year 2005. Although interest rates are rising in the US, consumer credit will perform really well across all available products.
The consumer credit forecast for 2018 released by TransUnion includes high expectations for increases in personal income, housing price index, total employment, GDP and various other factors. Personal negatives are expected to be outweighed, including the worrying increasing interest rates or slow vehicle sales.
Platinum Lending reacted to the report and declared that when looking at credit performance, the big part of the story is associated with mortgage loan delinquencies. The serious mortgage delinquency rate will decline in 2018, going as low as rates we have not seen since 2006. The reason for this is an increase in home prices and stronger employment rates.
Referring to the unsecured personal loan delinquency rate, TransUnion’s report showed that it will stay lower than a number of years ago, with limited movements to be noticed. The only rates that are expected to rise are credit card and auto loan delinquencies. Lenders are now fully aware of this and they are actively using risk management techniques to reduce the impact that could appear.
Mortgage Forecast Trends For 2018
- Low Delinquency Rates – Housing prices are rising and there is an improvement in total employment, leading to serious mortgage delinquency rates going down by an expected 1.65%.
- Refinancing And Rising Interest Rates – Interest rates are going to be higher in 2018 but reduction will appear in refined mortgages.
- HELOCs Return – The projection is of 1.6 million HELOCs working in 2018, reaching around 10 million by the time we reach 2022.
All this basically means that the strong economy is leading to low risk levels for lenders for mortgages. This is a trend that is now ongoing and will continue in 2018. Homeowners did refinance mortgages and because housing will be more expensive it is expected that they will not want to move.
Credit Card Trends For 2018
- Risk Distribution Stabilizes – Mainly because the rise in near prime and subprime credit card organizations. Risk distribution stabilizes, moving towards near prime or better. Delinquencies are now at manageable levels.
- Delinquencies Go Up – Severe delinquency rate per consumer will rise by 10 points, expected to reach 1.96% by the end of 2018. It is a rise but rates are way lower than recession levels (3% in 2009).
- Consumer Credit Card Debt Rises – Average card consumer balance will rise because of higher employment and median household income. The forecast by TransUnion is 1% increase, marketing the 5th consecutive yearly increase.
Lenders keep looking for a good balance with credit cards, trying to offer deals for consumers that are low risk and high risk. This balance is desired for financial institutions to maximize profits. Delinquencies are rising but this happens at a slow rate. Lenders are confident in taking risks as overall loss rates go up as profits also go up.