Equifax’s 1Q23 Report Provides Insight into State of Borrowers

Apr 24, 2023 | Corporate Insights, No Bull Economics

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While overall delinquencies are OK for now with people working, financial stress is evident by a sharp decline in mortgage applications & increasing problems with sub-prime borrowers.  

Trends in Hiring, Delinquencies, and Credit Tightening

  • Equifax reported that consumers are still strong, with unemployment at historically low levels & delinquencies only increasing moderately (back to pre-covid levels & significantly below 2009/2010 levels).
  • However, management reported lower hiring trends, with an increase in layoffs & headcount tightening. Gross hiring YTD through Feb 2023 was down -6%. This is notable as delinquencies tend to be more manageable when people are working.
  • In any case, subprime credit card & personal loan delinquencies have been increasing. Also, auto loan delinquency rates for subprime consumers are above both pre-covid and 2009/2010 levels.
  • Mortgage originations were down -56% in 2022 & are expected to decline -32% this year.
  • 2H23 mortgage inquiries are expected to decline -40% below 2015 – 2019 levels.
  • Management reported credit tightening from financial institutions – a trend largely unrelated to shrinking deposits. A relatively large pull-back from fintech lenders reflects a higher exposure to subprime borrowers who are experiencing higher delinquency rates. While mid-sized banks are also tightening (to a lesser degree), they are expected to continue originations & larger financial institutions are in good shape.
Mortgage Inquiries Graph
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