TransUnion predicts healthy credit market in 2018

Posted: 23 December 2017 4:01 pm
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2018 borrowers set to take out bigger loans, miss fewer payments

Borrowing is expected to go up while monthly payment trouble goes down.

Looking ahead to the new year, credit reporting agency TransUnion predicts US residents will be able to borrow more money while missing fewer monthly payments on their loans. That’s even despite anticipated interest rate hikes throughout the coming year.

The expectation is driven by trends that are pushing up the nation’s GDP, personal income, total employment and Housing Price Index, and the prediction covers auto loans, credit cards, mortgages and unsecured personal loans.

The biggest changes are likely to come in personal loans, where 2018 borrowers are set to bump the average up more than double the rate of inflation (4.9% compared with this year) to $8,461, as well as home loans that are set to rise about $5,000 (2%) to $205,534. Consumers will likely also see credit card debt edge up (just shy of 1% to $5,675) and auto loans rise slightly (0.6% to $18,694).

Meanwhile, TransUnion projects that fewer borrowers (61.7% less than five years ago) will get behind on their mortgage payments, the lowest level (1.65%) since 2005. Personal loan borrowers will also stay ahead of their payments (five-year delinquencies down 16.2% to 3.36% of the market), while auto loan and credit card debtors could head in the wrong direction. The forecast calls for a five-year rate of 18.7% more delinquencies in auto loans (1.46% of the market) and 22.5% more in credit cards (1.96% of the market).

“Despite expected interest rate rises, the prime rate remains well below historic norms, and we believe it will remain at levels that can still be well managed by most consumers,” TransUnion vice president of research and consulting Matt Komos said. It’s “a reflection of strong consumer sentiment rather than an indicator of consumers struggling to keep up with their obligations. Coupled with expectations of a strong economy, the consumer credit market is projected to remain on a healthy trajectory.”

The Federal Reserve Bank of New York recently cited a similar sentiment among consumers from a survey that showed American households that are expecting their income and spending to grow in the near future.

Comparing rates and terms on personal loans, home loans, credit cards and auto loans before you take on debt can lower your interest costs and keep monthly payments at a manageable level.

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