New Autos, Credit Cards Continue Slump in February

While first mortgages continued double-digit growth in February, credit unions ended the month with their lowest portfolios of new car loans and credit cards in more than two years.

Credit unions held $60.1 billion in credit card debt on Feb. 28, the lowest level since August 2018, according to the Fed’s G-19 Consumer Credit Report released Wednesday.

The balance was 7.9% lower than a year earlier — the steepest 12-month percentage drop since the Fed began tracking credit union credit cards in January 1984.

Analysts with Raddon, a research and advisory group for financial institutions based near Chicago, said Thursday the continued declines in balances in the 12th month of the COVID-19 pandemic reflect consumers’ use of federal relief to pay down their most expensive debt. But it might also reflect longer-term shifts in attitudes and behaviors around credit.

Bill Handel, chief economist and general manager of Raddon, a subsidiary of Fiserv, said consumer debt loads have fallen drastically since the Great Recession, including the years before the pandemic and during it.

Part of it might be changes in how millennials, ages 21 to 41, approach debt. Part of it might reflect baby boomers naturally shifting down their borrowing as they approach retirement.

“We don’t know how persistent this will be,” he said.

Meanwhile, CUNA’s Monthly Credit Union Estimates released Thursday showed familiar 12-month patterns from recent months as new car balances fell, used car balances had tepid increases and first mortgages gains continued to lead the portfolio.

New car loans fell 4.3% to $141.5 billion in February, the lowest balance since June 2018. The 4.3% drop for new cars was the largest 12-month drop since September’s 4.5% drop, which was the largest since at least August 2014.

New car loans had already begun to slip before the pandemic with heavier price competition, especially from captives. Used car loans, where credit unions are strongest, have also seen increased competition from captives.

Used car loans at credit unions grew 4.1% to $241.4 billion. A year earlier, from February 2019 to February 2020, it rose 3.8%.

Consumer term loans, which including Paycheck Protection Program (PPP) loans, grew 11.9% to $51.7 billion. A year earlier, it rose 5.8%.

First-lien mortgages grew 13.3% to $525.6 billion in February, about twice the growth rate from February 2019 to February 2020.

Second-lien mortgages fell 9.5% to $84.4 billion. A year earlier, it rose 2.6%.

The CUNA report estimated the nation’s 5,279 credit unions had 127.3 million members in February, a 3.2% gain from February 2020, compared with 3.5%% growth a year earlier. The report also showed these estimates for February and 12-month changes:

• Fixed-rate first mortgages rose 18% to $406.8 billion.
• Adjustable-rate first mortgages rose 1% to $122.1 billion.
• Second mortgages fell 13% to $29.9 billion.
• Home equity lines of credit fell 7% to $55 billion.
• Total loans grew 5% to $1.2 trillion, compared with 6.8% growth a year earlier.
• Assets grew 16.7% to $1.93 trillion, compared with 9.4% growth a year earlier.
• Savings grew 19.6% to $1.66 trillion, compared with 9.1% growth a year earlier.
• Capital grew 7.3% to $195 billion, compared with 10.7% growth a year earlier.
• Loans per member grew 1.8% to $9,400, compared with 3.2% growth a year earlier.
• Savings per member grew 15.9% to $13,032, compared with 5.4% growth a year earlier.