Delinquencies Increase Slightly; But Job and Wage Stability Expected to Keep Consumers’ Finances in Check

The increase follows declines in many loan categories at the close of last year.

7/11/2018 11:00 AM

Delinquencies Increase Slightly; But Job and Wage Stability Expected to Keep Consumers’ Finances in Check

First quarter consumer credit delinquencies for bank cards and home loans, for example, are edging up to “normal levels” but continue to remain below the 15-year average tracked by the American Bankers Association in its Consumer Credit Delinquency Bulletin.

Delinquencies declined across a majority of loan categories, including a significant change for bank cards, in the fourth quarter last year, ACA International previously reported.

Overall, delinquencies increased in nine of the 11 individual consumer loan categories tracked by the ABA, according to a news release on the report.

“The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, rose 9 basis points to 1.73 percent of all accounts.  That remains well below the 15-year average of 2.14 percent,” according to the news release.

Delinquencies are defined as a late payment 30 or more days overdue.

“Delinquencies have been so low for so long that it is not surprising to see them ease back toward more normal levels,” James Chessen, ABA’s chief economist, said in the news release. “We are still well below the 15-year average, but consumers should always maintain a cautious approach to credit. More jobs and better wages continue to be the key factors in keeping delinquencies low, and the economic fundamentals remain positive. Solid budget management remains very important, particularly with higher electric bills to keep cool in the summer heat and rising gas prices.”

After declining 16 basis points in the fourth quarter, well below the 15-year average of 3.6 percent and the lowest quarter-end level in more than three years, bank card delinquencies increased 60 basis points to 3.06 percent of all accounts, according to the ABA.

“Bank card delinquencies have been near historical lows for five years as consumers have done a great job managing their levels of debt,” Chessen said. “The ratio of credit card debt to disposable income remains low and is nowhere near pre-crisis levels.” 

He added that the increase in bank card delinquencies to start 2018 could be the result of “a significant moderation in revolving credit growth that quarter.”

Delinquencies increased in all closed-end loan categories and declined in two out of three open-end loan categories, according to the ABA.

Chessen said in the news release that he expects consumers will “remain financially disciplined” this year.

“Banks will continue a conservative approach to credit extension, and we hope that consumers will maintain their vigilant efforts to manage debt and ensure they can handle the economic conditions, year in and year out,” Chessen said.

Closed-End Loans

  • Composite ratio rose from 1.64 percent to 1.73 percent.
  • Direct auto loan delinquencies rose from 1.07 percent to 1.10 percent.
  • Indirect auto loan delinquencies rose from 1.78 percent to 1.93 percent.
  • Home equity loan delinquencies rose from 2.28 percent to 2.31 percent.
  • Marine loan delinquencies rose from 0.76 percent to 0.80 percent.
  • Mobile home delinquencies rose from 4.48 percent to 5.09 percent.
  • Personal loan delinquencies rose from 1.57 to 1.65 percent.
  • Property improvement loan delinquencies rose from 1.04 percent to 1.16 percent.
  • RV loan delinquencies rose from 0.73 percent to 0.78 percent

Open-End Loans

  • Home equity lines of credit delinquencies fell from 1.16 percent to 1.14 percent.
  • Non-card revolving loan delinquencies fell from 1.62 percent to 1.56 percent.
  • Bank card delinquencies rose from 2.46 percent to 3.06 percent.

Related Content from ACA International:

Greater Job Stability and Increased Take-Home Pay Partially Credited with Decline in Bank Card Delinquencies

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