Consumer Lending in the US

Household debt continues to rise

For the sixth consecutive year, US household debt continues to rise, reaching levels of outstanding balance higher than those observed during the Great Recession in 2008. Continuous outstanding balance growth has been driven by the two largest components of household debt, mortgage and education outstanding balances, with the latter being the highest contributor to growth over the review period.

Borrowers shifting towards alternative lenders

In search of a seamless and paperless experience, consumers are turning towards alternative financial service providers to address their lending needs. Emerging lending alternatives are shifting away from traditional lending requirements focused on credit scores and instead leveraging big data and machine learning to better evaluate a consumer’s creditworthiness.

Auto lending continues to attract prime consumers

Auto loans outstanding balances have reached another record high in Q1 of 2019 after seeing notable growth over the past five years. This growth is due to rising interest rates, increasingly expensive vehicles, and an increased average loan term (up from 61 months in 2010 to 69 months).

Mortgage originations decline while outstanding balances rise

Housing debt accounts for 68% of total consumer debt in the US and is expected to increase by USD305 billion in 2019. Mortgage balances already have increased to USD9.

Cloudy outlook ahead as Fed expected to continue to lower interest rates during the second half of 2019

After years of relatively low interest rates, the US Federal Reserve increased the interest rate during 2018 and the first half of 2019, resulting in a slowdown of the economy. A rise in interest rates results in higher borrowing costs for consumers, not only on newly originated loans, but also affects existing outstanding balances.

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