Smart Borrower Blog

Consumers Pull Debt Delinquencies Down to Record Low


Apr 16th, 2014 @ 7:27 PM by Amber Nelson


Americans managed their debts better in the fourth quarter of last year, according to a new report from the American Bankers Association, with significant improvements in all home-related loan delinquencies.

The ABA’s Consumer Credit Delinquency Bulletin reported that its composite ratio of delinquencies in eight types of open-end installment loans fell to 1.59 percent of all loans in the fourth quarter of 2013, a new record low, down from 1.63 percent in the third. By comparison, the average rate of loan delinquencies (30 days or more past due) over the past 15 years has been 2.34 percent.

Of the eight loan categories, only two saw increases in delinquencies. Personal loan delinquencies rose to 1.70 percent, up from 1.51 percent the previous quarter and mobile home loan delinquencies grew to 3.75 percent from 3.64 percent.

“As jobs, income and household wealth improve, people have a greater capacity to meet their financial obligations,” said James Chessen, ABA’s chief economist in a statement. “Improving consumer finances and closer attention to managing debt are the key factors behind these better numbers.”

The categories that posted improvements included direct and indirect auto loans falling to 0.79 percent from 0.88 percent, and 1.62 percent from 1.64 percent, respectively. RV loan delinquencies declined to 1.10 percent from 1.14 percent, property improvement loan delinquencies dropped to 1.07 percent from 1.25 percent and home equity loans had a decrease in the delinquency rate to 3.48 percent, down from 3.58 percent. Marine loan delinquencies were unchanged at 1.36 percent.

The ABA also measures three open-end loan types. Home equity lines of credit had delinquencies fall to 1.67 percent from 1.71 percent and non-card revolving loan delinquencies slip to 1.80 percent from 1.84 percent. Bank card delinquencies, however, climbed to 2.60 percent from 2.55 percent.

The improvement in all three home-loan categories was a first in a year.

“This across-the–board decline in home-related delinquencies reflects a steadily improving housing market,” Chessen said. “Rising home values are turning the economics back in favor of homeowners. This trend should continue through 2014 and help push delinquencies even lower.”

 

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

Leave a Reply