Smart Borrower Blog

Consumer Delinquencies Rise in Third Quarter


Jan 13th, 2016 @ 10:50 AM by Amber Nelson


Slower economic growth helped push credit delinquencies higher during the 2015 third quarter among American consumers, according to data from the American Bankers Association.

In its Consumer Credit Delinquency Bulletin, the ABA reported that the delinquency rate among closed-end loans (installment loans such as car loans and home equity loans) rose to 1.41 percent of all accounts, up 8 basis points from 1.36 percent in the second quarter. And among both open and closed-end loans, delinquencies (those with payments behind by 30 or more days) increased in six of the 11 categories.

Even still, the closed-end loan delinquency rate is very near all-time record lows. “The economy remains positive even though its momentum slipped a little in the third quarter,” said ABA chief economist James Chessen. “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.”

The only closed-end loan type to see a decrease in delinquencies in the third quarter was property improvement loans. The delinquency rate fell to 0.87 percent to 0.91 percent. Home equity lines of credit (open-end loans) also fell, dropping to 1.31 percent from 1.34 percent.

“The steady decline in home-related delinquencies has been a bright spot as they grind their way back to pre-recession levels,” said Chessen. “We expect this trend to continue as the housing market keeps gaining strength.”

Another open-end category, bank card delinquencies rose for the second straight quarter, climbing to 2.54 percent from 2.52 percent in the second quarter. Compared to the 15-year average of 3.72 percent, they are still historically low.

“A good economy and lower delinquency rates go hand-in-hand, and the Fed is betting on a stronger economy in 2016,” said Chessen. “If the economy remains solid and jobs continue to grow, we would expect delinquency levels to continue hovering near these historic lows.”

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

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