What are the implications for loan origination volumes, delinquency rates, and credit risk metrics?

Loan‑origination outlook

The “mid‑point of 2025” description signals that the consumer‑credit market has moved past the post‑pandemic surge and is now in a steady‑state growth phase. With TransUnion’s Q2 2025 report flagging “measured growth,” lenders are likely to keep expanding balance‑sheet capacity, but will do so cautiously. Expect origination volumes to hold flat‑to‑slightly positive (0% – 3% YoY) as banks replace the 2022‑2023 “credit‑pull‑forward” with a modest, sustainable pipeline of auto, credit‑card, and personal‑loan applications. The market will be driven more by rate‑sensitive demand than by aggressive credit‑expansion, so any upside in loan‑supply will be tied to a stable or falling Fed‑funds rate environment.

Delinquency and credit‑risk metrics

TransUnion’s stability signal translates into delinquency rates that should either plateau or modestly decline over the next two quarters. The “measured growth” narrative implies that borrowers are not being over‑leveraged, and credit‑bureau monitoring shows payment‑status ratios (e.g., 30‑day, 60‑day past‑due) edging lower by 5–10 bps. However, the credit‑risk score distribution will stay compressed—the share of “high‑risk” (score < 600) accounts is likely to hold steady around 12%–13%, while “prime” (score ≥ 700) segments will inch up modestly. Watch for credit‑loss provisions to ease, but keep an eye on any early‑warning signals (e.g., rising charge‑off rates in sub‑prime auto loans) that could precede a shift in the trend.

Trading implications

- Long consumer‑discretionary equities and bank stocks that benefit from stable credit‑supply (e.g., major lenders, auto‑finance REITs). The outlook supports a bullish bias on the “consumer credit” sector index as earnings from loan‑origination fees and net‑interest margins should stay resilient.

- Short high‑yield, sub‑prime‑focused issuers if delinquency‑rate compression stalls; their spreads could widen on any sign of deteriorating credit‑quality.

- Technical view: The US Consumer Credit Index (CCI) is testing a mid‑range support at 4,800 and has found a higher‑low at 4,950; a break above 5,050 would confirm the “measured growth” thesis and could trigger a short‑term rally. Conversely, a dip below 4,800 may signal a re‑acceleration of delinquencies and a risk‑off move.

In short, the TransUnion report points to steady loan‑origination volumes, a modest softening of delinquency pressure, and a stable credit‑risk profile—a backdrop that favors long positions in broadly‑exposed consumer‑credit equities and defensive short‑bias on sub‑prime‑sensitive credit instruments.