Smart Borrower Blog

Credit Card and Mortgage Delinquencies Rise in Latest Quarter


Jan 16th, 2019 @ 12:42 PM by Amber Nelson


While still well below historical averages, several categories of consumer credit delinquencies rose in the 2018 third quarter, including credit cards and home equity loans.

According to data from the American Bankers Association, delinquencies increased in six of the 11 categories tracked in the ABA Consumer Credit Delinquency Bulletin. The composite ratio – a measure of closed-end installment loan delinquencies – jumped 11 basis points to 1.87% of all accounts. Delinquencies are defined as loans with payments overdue by 30 days or more.

The increase was led by a rise in car and home equity loan delinquencies. Delinquent direct auto loans climbed to 1.16% in the third quarter, up from 1.06%, while home equity loan delinquencies rose to 2.53% from 2.43% the previous quarter.

“These results are not surprising as the economy moderates following some very robust quarters of growth this past year,” said ABA Chief Economist James Chessen. “The home and auto sectors have been lagging and that’s where we saw the delinquencies edge up a bit. The good news is that consumers remain confident and financially healthy amid a robust job market and rising wages.”

Bank card (bank-sponsored credit cards) delinquencies erased all of their 2nd quarter decline by rising 12 basis points to 3.05% of all accounts. Still, the new rate is comfortably below the pre-recession average of 4.33%.

“Bank card delinquencies remain low by historical standards, which is a direct result of consumers continuing to do a good job of managing their cards by keeping balances low relative to their income,” said Chessen.

Home-related categories saw an increase in two of the three. In addition to home equity loans, delinquencies rose on property improvement loans, climbing 7 basis points to 1.14%. Home equity lines of credit delinquencies dipped slightly, falling 1 basis point to 1.14%.

“The economy remains fundamentally strong, which helps consumers meet their obligations and remain on solid financial footing,” Chessen said. “We expect fourth quarter numbers will show very strong retail sales, which drives economic growth but can also lead to a financial frostbite if consumers overextend themselves. Prudent consumer spending is key to preventing delinquencies, and every indication is that consumers will continue their sound financial management practices.”

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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