The financial services industry is rebounding strongly from the early impacts of the COVID-19 pandemic, according to TransUnion’s Q2 2021 Quarterly Credit Industry Insights Report (CIIR). The mortgage, auto, credit card and personal loan industries exhibited renewed signs of strength at the mid-point of 2021.
In the initial months of the pandemic, many lenders struggled with making credit available to consumers in the face of branch closures and a remote workforce. One year later, lenders have adapted and shifted to a digital-first origination strategy and enhanced their capabilities to originate new accounts virtually. Signs of this origination growth were observed in Q2 2021, with originations increasing 76% YoY in the mortgage industry.
The new Credit Industry Indicator (CII) has shown measured improvement and is reflecting increased lender confidence, with the indicator most recently reaching a high of 128 in Q2 2021, up from 87 in Q2 2020. This significant jump demonstrates that consumers are rebounding from the pandemic and surpasses the 127 CII observed pre-pandemic in Q1 2020.
The CII offers a comprehensive view of consumer credit health and provides new insights on credit activity and financial performance for consumers in the United States. The indicator accomplishes this by aggregating consumer credit data to show the pronounced impact of economic and market events on consumer credit health. Data elements are summarized on a quarterly basis to analyze changes in credit health and are categorized under four pillars: demand, supply, consumer behavior and performance. These are combined into a single, comprehensive measure that reflects the current state of consumer credit health.
As could be expected, the greatest impact on consumer credit health in recent years was observed during the first few months of the COVID-19 pandemic. From Q1 2020 to Q2 2020 the CII fell 40 points to 87, the largest quarter-over-quarter drop in the past 10 years. Prior to this dramatic decline the CII had been on a continuous rise, reaching as high as 127 in Q1 2020. The CII’s all-time low of 66 occurred in Q2 2011 as the nation was still struggling in the aftermath of the Great Recession.
Mortgage origination volumes remain strong and showed a significant 78% YoY increase compared to the same time last year. Among the origination loan types, GSE loans doubled (110%) YoY, while Jumbo and FHA loan types grew at a much slower pace – 28% and 22% YoY, respectively. While refinances have declined from record levels, they accounted for the bulk of origination volume in Q1 2021 with 60% of total originations. Rising home prices have pushed the average balance of new mortgage loans to a record $298,115 in Q2 2021, driving total balances to $10.3 trillion in Q2 2021, another record. Account performance, however, remains steady as mortgage account delinquencies declined to 0.60% 90+DPD in Q2 2021 and are 29% lower than the same period last year (0.84% 90+DPD).
View the full report here.
