New TransUnion Study Finds Big Changes in Last Decade for Consumer Loan Wallet

By Keith Loria, Contributing Editor

Chicago—A new TransUnion study revealed that over the last 10 years, the consumer loan wallet, defined as the composition of loans that people typically carry, has materially changed for both the youngest and oldest segments of the population.

The study found that student loans have left the greatest imprint on those consumers ages 20-29, with their share of the consumer wallet nearly tripling in the last nine years.

“Younger consumers (20-29) have seen a dramatic increase in student loans as a share of their overall loan wallet. Both average balances and participation rates have increased,” Charlie Wise, vice president in TransUnion’s Innovative Solutions Group, tells MHN. “We also observed a significant decline in mortgage participation and average balances.”

In 2005, student loans made up 12.9 percent of the total loan balance share for this age group and it increased to 21.1 percent in 2009 and 36.8 percent in 2014.

“Younger consumers have decreased their participation in the mortgage market over the past decade,” Wise says. “While some of this may be attributable to ‘crowding out’ by the increased student loan obligations, this is also likely driven by two key shifts: the decreased ability of younger consumers to access the mortgage loan market, and decreased/delayed demand by younger consumers to purchase homes in the aftermath of the mortgage crisis.”

Meanwhile, older consumers (60+) have increased their borrowings on all major loan types, including mortgage and HELOC, the only age tier to see rising borrowings since 2009.

“60+ consumers have shown increased demand of borrowing—mortgage loans have increased in both average balances and participation rates—and some of that increased borrowing may be to help fund both their own expenses (supplementing retirement savings and pensions) as well as borrowing to help fund shortfalls by younger family members—children and grandchildren—who may themselves be struggling in the aftermath of the recession and continued weakness in employment,” Wise says.

Consumers ages 60+ saw an increase in both mortgages and credit card balances. And, interestingly, while only 5 percent of this age group has student loans, they experienced a rise in student loan debt from $14,696 in 2005 to $27,168 in 2014.

Wise says that an implication for the apartment industry may be that, as younger consumers—those in their 20s as well as those in their 30s—have decreased their participation in mortgage borrowing and presumably in home ownership, more of those younger consumers may turn to renting rather than owning their homes.

“This could mean increased demand for apartment housing as younger consumers continue to defer/delay purchasing homes, or need to wait until they have paid down their student loan obligations and improved their credit picture before they are able to access the mortgage market to purchase a home,” he says.

The study revealed that recent trends relating to lower participation in the mortgage market by younger consumers are likely to persist into the near future.