The American Bankers Association’s (ABA) latest Consumer Credit Delinquency Bulletin indicates an increase in both open- and closed-end loan delinquencies during the first quarter (Q1) of 2017.
The largest upticks occurred among closed-end auto loans, according to the report. Delinquencies on indirect auto loans increased 8 basis points to 1.83 percent of all accounts and delinquencies on direct auto loans increased 9 basis points to 1.03 percent.
Delinquencies in home equity lines of credit rose to 1.11 percent and those in home equity loans increased to 2.59 percent. Property improvement loan delinquencies remained consistent at 0.98 percent.
ABA Chief Economist James Chessen said in a blog post that the rise in delinquencies was bound to happen, considering the duration for which they remained exceptionally low.
“Eight years into the economic recovery, it was inevitable that we’d start to see delinquencies edge up from their extremely low levels,” Chessen said. “Even in a strong economy with good job growth, there are always people living paycheck to paycheck. Any small bump in the road can be enough to cause them to miss a payment or two on their loan. The good news is that most consumers have been careful to manage their debt levels to ensure they can withstand those small setbacks and meet their obligations.”
The composite ratio of the ABA report, which tracks delinquencies in all closed-end installment loan categories, remained well below the 15-year average of 2.17 percent despite an increase of 5 basis points to 1.56 percent.
The rate of bank card delinquencies went up 5 basis points to 2.74 percent, according to the report.
TransUnion released a report in June detailing the recent rises in delinquency rates among auto loans and bank cards, as well as decreases in mortgage delinquencies.
“Over the last three quarters, we observed a leveling off of the mortgage delinquency rate, which suggests we may be approaching a natural floor for delinquencies,” the TransUnion report states. “The mortgage delinquency rate declined 11.9 percent at the beginning of the year, dropping to 2.07 percent in Q1 2017 from 2.35 percent in Q1 2016. While the mortgage delinquency rate has declined steadily for 15 straight quarters, the significant drop observed this quarter puts us at a level we did not expect to reach until the third quarter this year.
“This is a positive sign for the industry, indicating we are recovering at a faster pace than expected. It may also suggest opportunities to cautiously and prudently extend access to low risk borrowers.”The TransUnion report also states that despite increased delinquency rates, as noted in the ABA report, balances for auto loans grew steadily at a moderate pace during the first quarter of 2017.
“The year-over-year growth rate in Q1 2017 was 7.3 percent, the lowest level we’ve observed since Q2 2012, the TransUnion report states. “The average auto balance per consumer rose to $18,386, up 1.8 percent from $18,065. Total auto balances reached $1.12 trillion, up from $1.05 trillion in Q1 2016.”
The TransUnion report also notes a first quarter uptick in bank card delinquencies, attributing it to an increase in the quantity of subprime cards in the market. It also states that bank card delinquency rates remain at historic loans despite recent increases.
“The recent surge in subprime cards has contributed to an increase in the card delinquency rate at the start of the year, but from a pre-recession, historical perspective, we are still at low levels of delinquency,” the report states. “The 90-day+ consumer-level credit card delinquency rate increased from 1.5 percent in Q1 2016 to 1.69 percent in Q1 2017. This is elevated from the Q1 delinquency average of 1.51 percent observed between 2013 and 2017 and has been anticipated since subprime access began expanding in 2014.”
The report also states that “lenders have taken a deliberately cautious approach re-entering subprime card lending by keeping average credit lines lower for risky borrowers.” However, the growth rate for subprime consumers in the card market was 8.9 percent in the first quarter.
“Of the consumers with access to a bank card, 16.33 million were subprime consumers, an additional 2.32 million more than just two years ago,” according to the report.