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The Healthy Credit Market is Supported by a Drop in Mortgage Delinquencies

Delinquent Notice BHBalances grew and delinquencies remained subdued across all credit products including mortgages, according to TransUnion’s Q3 2016 Industry Insights Report.

Additionally, the analysis points to a healthy, well-functioning consumer credit market, which has seen continued growth across diverse products including the mortgage market.

“The consumer credit market is performing well, as more consumers are gaining access to loans and paying them off in a timely fashion,” said Nidhi Verma, Senior Director of Research and Consulting, Financial Services Business Unit for TransUnion. “We continue to see strong participation rates from the youngest consumer group, coupled with low delinquency levels—a promising sign for the industry.”

Specifically, the mortgage delinquency rate fell 8.4 percent from 2.5 percent in Q3 2015 to 2.29 percent in Q3 2016. This was the lowest level seen since Q3 2009.

In contrast, subprime and near prime mortgage originations experienced the largest year-over-year growth from Q2 2015 to Q2 2016. Subprime originations reached nearly 64,000 in Q2 2016, the highest level since Q4 2009 and a 10.9 percent growth rate year over year. Likewise, the report found that near prime originations grew 5.7 percent to more than 262,000 in Q2 2016. This was the highest level since the Great Recession.

And in addition, overall mortgage originations grew to 1.99 million in Q2 2016. This was a 3.7 percent rise from 1.92 million in Q2 2015.

“Mortgage originations have experienced steady growth across all risk tiers, and these new milestones in subprime and near prime account originations reflect growing credit access across the risk spectrum,” said Joe Mellman, VP and Mortgage Business Leader for TransUnion. “While access has grown, it’s important to note that the subprime share of originations was only 3.2 percent, and the near prime share was 13.2 percent of all originations. We do not see a cause for concern.”

The report also found that total mortgage balances grew 1.7 percent, from $8.25 billion in the third quarter of 2015 to $8.39 billion in Q3 2016.

“The increase in mortgage balances was primarily driven by continued low interest rate availability supporting origination growth and higher home values leading to higher average new loan amounts,” said Mellman.

To read the full report, click HERE. [1]