| Delinquencies fell in seven of 11 consumer loan categories in this year’s first quarter, according to the American Bankers Association’s latest Consumer Credit Delinquency Bulletin, released today.
The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 3 basis points to 1.38 percent of all accounts. The ABA said this continues a three-year trend of remaining well below the 15-year average of 2.23 percent. A delinquency here is defined as a late payment that is 30 days or more overdue.
The ABA attributed the trend to consumers managing their finances more responsibly, in part due to steadily improving conditions for those consumers.
“That’s a strong indication of the direction of improvement here. We’re feeling very positive and believe it’s a function of consumers continuing to be vigilant about their finances and not overspending at the end of last year,” said ABA Chief Economist James Chessen. “Those are very good things that I think portend even better performance on loans in the future.”
Home-related delinquencies fell in two out of three categories. Home equity line delinquencies fell 3 basis points to 1.15 percent of all accounts, while home equity loan delinquencies rose 6 basis points to 2.74 percent of all accounts after falling 23 basis points in the previous quarter. The ABA said that the first quarter was the first time since 2008 that both home equity loan and line delinquencies are at or below their 15-year averages. Property improvement loan delinquencies fell 3 basis points to 0.89 percent of all accounts.
In particular, Chessen noted the improving housing market and growing equity in consumers’ homes as a factor. He anticipated that the market for home equity loans and lines would continue to grow as an increasingly more borrowers look to make property improvements or pay off higher-interest debt.
Bank card delinquencies fell five basis points to 2.47 percent of all accounts, remaining well below their 15-year average of 3.71 percent.
Though home equity loan delinquencies ticked up slightly, from 2.68 percent to 2.74 percent, Chessen cautioned that one quarter does not make a trend and that those rates still hovered around historic lows.
“Really, the levels of delinquencies for the composite index as well as for credit cards has been floating along the historic bottom for many, many quarters and that, I think, is a very positive sign about the progress of the economy and the work consumers have done to manage their budgets,” he said.
Chessen said he expects the low delinquency levels to continue as long as economic conditions remain stable and consumers disciplined.
The entire bulletin can be viewed here.
