Two different reports show small increases in loan delinquencies in the back half of 2017, but the percentages remain comparatively low and bode well for the state of the economy in 2018.
The American Bankers Association Consumer Credit Delinquency Bulletin tracks delinquencies in eight closed-end installment loan categories and three open-end loan categories. The composite ratio rose 12 basis points to 1.68 percent of all accounts in Q3 2017, but remains well below the 15-year average of 2.15 percent. The ABA considers any late payment that is 30 days or more overdue to be a delinquency.
The ABA tracks delinquencies on eight types of closed-end loans: home equity loans, marine loans, mobile home loans, indirect auto loans, direct auto loans, personal loans, property improvement loans, and RV loans. The ABA also tracks three types of open-end loans: bank cards, non-card revolving loans, and home equity lines of credit.
“Delinquencies remained remarkably low for this late in the economic cycle,” said James Chessen, ABA’s Chief Economist. “The very modest increase in closed-end loan delinquencies reflects a slow movement back toward more normal levels. Jobs remain plentiful and incomes continue to rise, which has helped boost consumer confidence. The bottom line is that consumers are feeling comfortable with their finances and have a proven record of successfully meeting their financial obligations over the last several years.”
Home equity loan delinquencies were down 8 basis points (bps) to 2.42 percent of all accounts. For comparison’s sake, the 15-year average is 2.93 percent.
HELOC delinquencies increased by 1 bps to 1.08 percent of all accounts, still below the 15-year average of 1.18 percent. Property improvement loan delinquencies increased by 13 bps to 1.08 percent of all accounts, but this increase is still also below the 15-year average of 1.32 percent.
“Home-related delinquencies continue to show overall improvement as the housing market gains strength,” said Chessen. “With higher property values and greater home equity, people are well-positioned and motivated to ensure their loan payments remain current.”
S&P Dow Jones Indices and Experian also released S&P/Experian Consumer Credit Default Indices data covering up through December 2017. According to the release, “The indices represent a comprehensive measure of changes in consumer credit defaults.” The indices track data in three different categories: auto loans, bank cards, and first mortgage defaults. The indices show that first mortgage default rates increased by two bps in December, settling in at 0.68 percent. It was at 0.71 percent in December 2016.
"The data are also showing some changes among the five cities tracked in this release,” said said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Chicago has now experienced the highest consumer credit default rate for three months running. For a long time, Miami's default rate was the highest across the five cities. The first mortgage default data dominate the city-level default indices. During the financial crisis, Miami experienced large declines in home prices which led to an increase in the mortgage defaults. As Miami home prices have recovered, its overall consumer credit default rate is no longer an outlier."