Mortgage activity plunged before the start of the year, but subprime originations dropped the least, according to TransUnion. Despite dwindling volume, borrower delinquency rates hit historic lows in the first quarter.
Originations across all risk tiers fell 13.7% year-over-year in the fourth quarter of 2018 to 1.5 million loans, but those that were subprime declined by just 4.9%.
“Interestingly, subprime originations slowed less than other risk tiers, a pattern we’ve been observing since Q1 2017,” Joe Mellman, TransUnion senior vice president and mortgage business leader, said in a press release.
Serious delinquency rates at the start of 2019 dropped to 1.44% from 1.74% on an annual basis.
“Across the consumer wallet, delinquencies have largely remained at low levels, an indication of the overall health of the consumer credit market,” said Matt Komos, vice president of research and consulting in TransUnion’s financial services business unit. “To garner more market share, we expect lenders to expand their buy box and grow their books on both ends of the credit spectrum.”
“Paradoxically, even as home prices have increased, we observed a decline in average new account balances. This is at least partially driven by mix shift across the 20 largest MSAs, where originations shrank in the most expensive MSAs and grew in the least expensive MSAs,” Mellman said.
But the average debt per borrower increased at the beginning of the year, growing to $208,057 in 1Q19 compared to $202,470 from the same period a year ago. Amid decreasing delinquencies, this shows promise for the consumer credit market.