Delinquencies are on the decline for the most part, according to analysts at the American Bankers Association (ABA) who expect that trend to continue. Bank card delinquencies saw the most significant drop while home equity loans stood as a notable outlier from the downward trend among delinquency categories.
The ABA’s Consumer Credit Delinquency Bulletin indicated that eight out of 11 categories the association tracks showed improvement or no change in the second quarter. The two others only increased by 1 basis point. The ABA report defines a delinquency as a late payment that is overdue by 30 days or more.
A 12-basis point increase in home equity loan delinquencies is cited as the primarily contributor to a 3-basis point increase in the composite ratio, which tracks delinquencies in eight closed-end installment loan categories. All other closed-end loans either saw a decline in delinquencies or no change, the report states. The composite ratio for delinquencies totals 1.76 percent of all accounts, still much lower than the15-year average of 2.13 percent.
“As the economy keeps humming along, delinquencies have stayed at very low levels,” ABA Chief Economist James Chessen said in a press release. “Overall, consumer financial health has been excellent. Jobs are plentiful, wages are rising and savings rates have held steady at elevated levels, which paints a vivid picture conducive to low delinquencies. While delinquencies have held steady, the holiday season is fast approaching and a watchful eye on budgets is the key to successfully managing debt obligations.”
Bank cards delinquencies saw the greatest decline – 13 basis points to 2.93 percent of all accounts – staying far lower than the 15-year average of 3.55 percent.
“Consumers are spending in line with their income and managing their credit cards very well,” Chessen said. “This vigilance has kept credit card debt low relative to income for six years, and positions consumers to continue supporting our growing economy.”
The increase in home equity loan delinquencies brought the delinquency percentage for all accounts to 2.43 percent. That figure still is much less than the 15-year average of 3 percent, the report notes. Home equity line of credit delinquencies ticked up 1 basis point to 1.15 percent of all accounts, also below the 15-year average of 1.21 percent. Property improvement loan delinquencies dropped 9 basis points to 1.07 percent of all accounts, putting them further below the 15-year average of 1.28 percent.
“Despite the upward blip in home equity delinquencies this quarter, the trend continues in the right direction,” Chessen said. “Home-related delinquencies are back down to pre-recession levels.”
The report also details declines in delinquent auto loans and notes a positive outlook for the job market, which analysts expect to help continue the downward trend in delinquencies.
“We expect the strong job market to continue over the next year, which should improve household finances and help keep delinquencies in check,” Chessen said. “As always, judicious spending is the key to preventing delinquencies.”
The following figures included in the report represent all seasonally-adjusted second quarter closed- and-open-end loan delinquency categories:
Closed-end loans
- Direct auto loan delinquencies fell from 1.1 percent to 1.06 percent.
- Marine loan delinquencies fell from 0.8 percent to 0.74 percent.
- Mobile home delinquencies fell from 5.09 percent to 5.07 percent.
- Personal loan delinquencies fell from 1.65 to 1.47 percent.
- Property improvement loan delinquencies fell from 1.16 percent to 1.07 percent.
- Indirect auto loan delinquencies remained at 1.93 percent.
- RV loan delinquencies remained at 0.78 percent.
- Home equity loan delinquencies rose from 2.31 percent to 2.43 percent.
Open-end loans
- Bank card delinquencies fell from 3.06 percent to 2.93 percent.
- Home equity lines of credit delinquencies rose from 1.14 percent to 1.15 percent.
- Non-card revolving loan delinquencies rose from 1.56 percent to 1.57 percent.