Three credit union market perspectives – Q1 2023

The last quarter of 2022, showed encouraging data on the growth credit unions experienced with auto loan balances. As interest rates continue to rise, credit unions are well positioned to gain additional market share. Consumer data around non-mortgage minimum payments due indicate that consumers are feeling the impacts of inflation and the rapidly increasing rate environment. Lastly, delinquency has mostly returned to pre-pandemic levels and is trending upward, while mortgage and HELOC performance remain at historically low levels.

Three key observations from our latest Credit Union Market Perspectives Report:

1. Non-mortgage minimum payments due increased significantly across risk tiers in 2022. With pandemic-era lender accommodations and government stimulus payments largely gone, inflation on the rise and a rapidly increasing rate environment, consumers’ monthly obligations outside of mortgage have significantly increased across credit risk tiers. While increasing debt levels doesn’t always necessarily signal red flags, for lenders, it is critical to monitor portfolios on a more frequent basis as the macroeconomic environment evolves. Keeping a keen eye on leading risk indicators such as changes to excess payments made, which is closely correlated to consumer liquidity, can give lenders an advanced view of risk, upwards of 3-6 months before loans turn delinquent.
2. As market rates have risen, credit unions have again emerged a top auto loan option for consumers. In Q4 2022, TransUnion data showed that credit unions grew auto loan balances by over 20% year-over-year, outpacing the rest of the market, which grew auto loan balances by low single digits during the same period. As interest rates continue to increase, credit unions are well positioned to gain additional auto market share as well as capitalize on their newly gained market share. Auto refinance and recapture campaigns are a quick and effective way to engage consumers with auto loans, and market analytics can also help credit unions better understand their position and competitors’ strengths in search for opportunities in auto lending.
3. Despite a seasonal decline for some lenders, delinquency has mostly returned to pre-pandemic levels and is trending upward. Credit cards and personal loans continue to see elevated levels of delinquency, while mortgage and HELOC performance remains historically strong. The high level of delinquency in unsecured debt can be partly attributed to the increasing cost of living across the market, but also an increasing reliance of unsecured debt and corresponding debt payments by consumers. Secured loans, including mortgage, HELOC and auto loans continue to perform in line with periods prior to 2020. In addition to monitoring portfolios on a regular basis, if loans do go delinquent in 2023, it will be crucial for lenders to intelligently prioritize collection queues, targeting those with the means and the willingness to cure.

Check out the full Market Perspectives Report here.