Consumer delinquencies on closed-end personal and home equity loans, for example, as well as bank cards increased slightly in the third quarter of 2015, according to the American Bankers Association’s latest Consumer Credit Delinquency Bulletin. However, overall consumer delinquencies still remain close to historical lows.
The increase in closed-end loan delinquencies occurred as growth in the economy slowed in the third quarter, according to a news release from the ABA.
The composite ratio of eight closed-end installment loan categories increased five basis points to 1.41 percent of all the accounts in the third quarter, according to the news release. The third quarter result is still 10 basis points lower than the third quarter 2014 composite ratio and shows closed-end loan delinquencies are also well below the 15-year average of 2.25 percent.
Delinquencies, defined by the ABA as a late payment that is 30 days or more overdue, increased in six of the 11 individual loan categories tracked in the third quarter.
- Personal loan delinquencies rose from 1.41 percent to 1.52 percent.
- Direct auto loan delinquencies rose from 0.72 percent to 0.74 percent.
- Indirect auto loan delinquencies rose from 1.45 percent to 1.51 percent
- Mobile home delinquencies rose from 3.55 percent to 3.59 percent.
- Home equity loan delinquencies rose from 2.90 percent to 2.91 percent.
- RV loan delinquencies remained at 0.95 percent.
- Marine loan delinquencies remained at 1.09 percent.
- Property improvement loan delinquencies fell from 0.91 percent to 0.87 percent.
- Bank card delinquencies rose from 2.52 percent to 2.54 percent.
- Home equity lines of credit delinquencies fell from 1.34 percent to 1.31 percent.
- Non-card revolving loan delinquencies fell from 1.80 percent to 1.71 percent.
“The economy remains positive even though its momentum slipped a little in the third quarter,” said ABA’s Chief Economist James Chessen in the news release. “Slower job and household income growth made for fewer improvements in delinquency rates. Fortunately, consumers remained disciplined in managing their debts, which has kept delinquencies close to historical lows.”
Home-related delinquencies continued to decline in the third quarter 2015. Home equity line delinquencies declined three basis points to 1.31 percent of all accounts and property improvement delinquencies declined four basis points to 0.87 percent of all accounts, according to the news release. Home equity loan delinquencies increased slightly to 2.91 percent of all accounts after a 22-basis point decline in the second quarter.
“The steady decline in home-related delinquencies has been a bright spot as they grind their way back to pre-recession levels,” Chessen said in the news release. “We expect this trend to continue as the housing market keeps gaining strength.”
While consumers’ bank card delinquencies increased slightly from 2.52 percent to 2.54 percent of all accounts in the third quarter, they still remain below the 15-year average of 3.72 percent, according to the ABA.
Bank card delinquencies also increased slightly in the second quarter, ACA International previously reported.
Chessen said he expects delinquencies will remain near the historically low levels in the future as the economy is expected to improve.
“A good economy and lower delinquency rates go hand-in-hand, and the [Federal Reserve] is betting on a stronger economy in 2016,” he said. “If the economy remains solid and jobs continue to grow, we would expect delinquency levels to continue hovering near these historic lows.”
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