As Matt Slonaker, I’ve had the chance to dive deep into the latest FY26-Q2 Lending Conditions Chartbook from Experian, and it paints a fascinating picture of where we stand in the lending landscape as of June 2025. This report, packed with data on economic trends, credit activity, and consumer behavior, offers a lot to unpack—both positives to build on and challenges to navigate. Here’s my take on the key trends and what lending teams should be doing to position themselves for success over the next three to five years.

Key Positive Trends

1. Resilience in the U.S. Economy: Despite early fears of a tariff-induced recession in 2025, the U.S. economy has held strong so far. The Chartbook notes that recession fears have subsided, and Fed officials’ latest projections, while dialing back growth forecasts to around 2.0-2.1% for 2025, still reflect a stable outlook with two planned 25bp rate cuts. This stability gives lenders a solid foundation to operate from, especially as real incomes have started to improve after a softer 2024, potentially boosting consumer spending capacity.
2. Growth in Mortgage Originations: One of the standout positives is the year-over-year increase in mortgage originations, particularly in the northwestern U.S. and among subprime borrowers. The data shows a notable uptick, with the index for first mortgage originations by score reaching 150 by May 2025 (base 100 in May 2024). This suggests a broadening market, where even riskier segments are re-entering the housing market, offering new opportunities for lenders willing to adapt their underwriting.
3. Slowing Delinquency Growth: The rise in mortgage delinquency has decelerated, with a national average of 1.8% for 30+ days past due (DPD). While the Southeast shows higher rates, this overall slowdown is a good sign of improving credit health, reducing some of the pressure on loan portfolios and signaling that borrowers are managing their obligations better amidst economic uncertainty.

Key Negative Trends

1. Economic Uncertainty and Policy Impacts: The macro backdrop is shaky. Fed officials have raised unemployment and inflation forecasts, reflecting concerns about the delayed effects of policy changes like tariffs. The Trade Policy Uncertainty Index spiking to 9000 and businesses reporting hesitancy in hiring and investment due to tariff and regulatory uncertainty are red flags. This could tighten credit conditions further, as banks are already increasing lending standards for businesses.
2. Softening Labor Market and Consumer Pullback: Unemployment remains low, but early WARN notices and weakening job gains in higher-wage industries signal trouble ahead, especially for white-collar workers and recent grads. Coupled with higher-income consumers pulling back on spending—key drivers of economic activity—this could dampen loan demand and increase default risks over time.
3. Housing Market Constraints and Mortgage Challenges: High prices and interest rates continue to stifle the housing market, with homebuilders and buyers pessimistic about the remainder of 2025. Mortgage rejection rates are at a decade-high for refinances (60%), and younger borrowers expect higher rejection rates (up to 40% perceived likelihood), reflecting affordability issues and tightening standards. This could shrink the mortgage market unless rates ease significantly.

Strategies for Lending Teams to Come Out on Top (2025-2030)

Based on this data, here’s how I think lending teams should strategize to thrive in the next three to five years:

1. Leverage Technology for Risk Assessment and Efficiency:
• The rise of AI replacing tasks, as noted in the Chartbook, is a double-edged sword. Lenders should invest heavily in AI-driven underwriting models to better assess risk, especially for subprime borrowers where origination growth is strong. This can help balance the increased rejection rates and tap into new market segments.
• Automate processes to reduce costs and improve turnaround times, making lending shops more competitive as demand fluctuates with economic uncertainty.
2. Target Niche Markets with Tailored Products:
• The growth in northwestern U.S. mortgage originations and subprime borrower activity suggests regional and credit-score-based opportunities. Develop tailored mortgage and personal loan products for these segments, with flexible terms to address affordability challenges.
• Consider partnerships with local builders or fintechs to stimulate demand in constrained housing markets, offering incentives like lower down payments or rate buydowns.
3. Prepare for a Tightening Credit Environment:
• With banks tightening business lending standards and consumer sentiment wavering, focus on building robust credit risk management frameworks. Stress-test portfolios against higher unemployment and inflation scenarios to mitigate losses.
• Diversify loan portfolios beyond mortgages—explore growth in auto loans or HELOCs (Home Equity Lines of Credit), where data suggests potential stability—to hedge against a potential mortgage slowdown.
4. Enhance Customer Education and Support:
• The high perceived rejection rates for mortgages (especially among younger borrowers) indicate a need for better financial education. Offer tools and counseling to improve application success rates, building trust and loyalty.
• Proactively communicate with existing borrowers about refinancing options as rates are expected to drop, turning a negative trend into a retention opportunity.
5. Monitor Macro Trends and Adapt Quickly:
• Keep a close eye on trade policy developments and Fed rate cut timelines. The uncertainty around tariffs and inflation could shift lending conditions rapidly, so maintain agile strategies to adjust pricing, terms, or marketing focus.
• Use real-time data analytics (like Experian’s Ascend Market Insights) to track regional delinquency trends and adjust credit policies accordingly, especially in higher-risk areas like the Southeast.

Final Thoughts

The lending landscape in 2025 is a mix of cautious optimism and looming challenges. The resilience in mortgage originations and slowing delinquency growth are bright spots we can build on, but the economic uncertainty, softening labor market, and housing constraints demand proactive adaptation. By embracing technology, targeting niche markets, and staying nimble, lending teams can not only weather the storm but emerge stronger by 2030. This is a pivotal moment to innovate and position ourselves as leaders in a shifting credit environment—let’s seize it!

I’d like to expand my point of view by adding three to five key bullets for each major asset class—mortgage, auto, credit card, unsecured personal loan, and HELOC (Home Equity Line of Credit). These insights are drawn from the data and reflect strategies lending teams should consider to navigate the current environment and thrive from 2025 to 2030.

Mortgage

• Opportunistic Growth in Subprime and Regional Markets: The Chartbook highlights a significant year-over-year increase in mortgage originations, particularly among subprime borrowers and in the northwestern U.S. (up to 35% YoY change in May 2025). Lenders should develop specialized underwriting models and targeted marketing to capture this growing segment while managing risk.
• Address High Rejection Rates with Education: With mortgage rejection rates at a decade-high (60% for refinances) and younger borrowers perceiving a 40% likelihood of rejection, invest in financial education tools and pre-qualification services to improve application success and build trust.
• Prepare for Slow Growth in Total Debt: Despite new originations rising, total mortgage debt growth has slowed, signaling a constrained market. Offer competitive refinancing options as the Fed plans two 25bp rate cuts in 2025 to stimulate demand.
• Monitor Regional Delinquency Risks: The Southeast shows higher mortgage delinquency rates (above the 1.8% U.S. average for 30+ DPD), requiring enhanced risk monitoring and tailored delinquency management programs in these areas.

Auto

• Capitalize on Stable Demand: While the Chartbook doesn’t provide specific auto loan data, the resilience in consumer spending and improving real incomes suggest stable auto loan demand. Expand offerings with flexible terms to attract buyers in a high-interest-rate environment.
• Tighten Credit Standards Proactively: With economic uncertainty and softening labor market conditions, anticipate higher default risks. Implement stricter credit scoring and loan-to-value (LTV) ratios to protect against potential increases in auto loan delinquencies.
• Leverage Used Car Market Opportunities: As new car prices remain elevated due to supply chain issues, target the used car market with competitive financing rates, potentially partnering with dealerships to boost origination volume.
• Enhance Digital Application Processes: Streamline online loan applications and approvals to meet consumer expectations for speed, especially as younger borrowers (impacted by mortgage rejections) may shift to auto financing.

Credit Card

• Focus on Higher-Income Segments with Caution: The pullback in spending by higher-income consumers, a key driver of credit card usage, signals a need for targeted promotions to retain this group while avoiding overextension. Offer rewards programs tailored to their spending habits.
• Monitor Delinquency Trends Closely: Although specific credit card delinquency data isn’t detailed, the softening labor market and rising early layoff notices suggest potential stress. Strengthen collection strategies and adjust credit limits to mitigate risk.
• Innovate with AI-Driven Personalization: Use AI to analyze spending patterns and offer personalized credit limits or payment plans, enhancing customer retention as economic uncertainty impacts repayment capacity.
• Promote Balance Transfer Options: With expected rate cuts in 2025, introduce competitive balance transfer offers to attract new cardholders and reduce interest burdens, capitalizing on consumer sensitivity to high rates.

Unsecured Personal Loan

• Target Niche Borrower Needs: The Chartbook’s focus on lending activity suggests untapped potential in unsecured personal loans. Develop products for specific purposes (e.g., debt consolidation, medical expenses) to attract borrowers amidst economic uncertainty.
• Tighten Underwriting Standards: With inflation concerns and labor market softening, increase scrutiny on credit scores and debt-to-income ratios to manage default risks, especially as consumer sentiment wavers.
• Offer Flexible Repayment Plans: Introduce adjustable repayment terms to accommodate borrowers facing income volatility, leveraging the improving real incomes to drive demand while mitigating early defaults.
• Leverage Digital Platforms: Expand online loan applications and approval processes to compete with fintechs, ensuring quick access to funds to meet urgent borrower needs in a competitive market.

HELOC

• Seize Home Equity Opportunities: With mortgage debt growth slowing but home equity still available, promote HELOCs as a refinancing or home improvement option, especially as interest rates are expected to ease with Fed rate cuts.
• Manage Risk in a Tight Market: The constrained housing market and high rejection rates for mortgages suggest cautious HELOC expansion. Implement strict LTV and creditworthiness checks to avoid overexposure to declining property values.
• Educate Borrowers on Benefits: Given the pessimism among homebuilders and buyers, launch campaigns to educate consumers on HELOC advantages (e.g., variable rates, tax deductibility), boosting application rates.
• Monitor Regional Variations: Align HELOC offerings with regional housing trends, focusing on areas with lower delinquency rates (outside the Southeast) to optimize portfolio performance.

Final Thoughts (Reiterated and Expanded)

The lending landscape, offers a mix of growth opportunities and risks across these asset classes. Mortgages show promise in subprime and regional markets but are hampered by high rejections and slow debt growth. Auto and unsecured personal loans present stable demand if managed with tight credit standards, while credit cards require careful segmentation to retain high-income users. HELOCs could be a sleeper hit if marketed effectively in a softening housing market. By leveraging technology, tailoring products, and staying vigilant on macro trends like tariff impacts and Fed policy, lending teams can turn these insights into a competitive edge over the next three to five years.