Installment loan delinquencies rose slightly in the second quarter, according to the American Bankers Association’s (ABA) Consumer Credit Delinquency Bulletin.
According to the ABA’s composite ratio, which tracks delinquencies in eight closed-end installment loan categories, delinquencies climbed 3 basis points to 1.76 percent of all accounts. The increase was driven primarily by a 12-basis point increase in home equity loan delinquencies. Delinquency is defined as a payment that is 30 days or more overdue.
Overall, the composite ratio is below the 15-year average of 2.13 percent. Despite the sharp increase in home equity delinquencies, 8 of the 11 categories tracked by ABA showed improvement or held steady. Additionally, two others – including home equity line of credit delinquencies — edged up only 1 basis point to 1.15 percent of all accounts. This is below the 15-year average of 1.21 percent.
“Despite the upward blip in home equity delinquencies this quarter, the trend continues in the right direction,” ABA Chief Economist James Chessen said. “Home-related delinquencies are back down to pre-recession levels.”
The report also found that delinquencies in bank cards, which are credit cards provided by banks, decreased 13 basis points to 2.93 percent of all accounts. This is below the 15-year average of 3.55 percent.
“Consumers are spending in line with their income and managing their credit cards very well,” Chessen said. “This vigilance has kept credit card debt low relative to income for six years, and positions consumers to continue supporting our growing economy.”
Further, delinquencies in direct auto loans, which include those arranged directly through a bank, fell 4 basis points to 1.06 percent of all accounts. This is also below the 15-year average of 1.48 percent. Indirect auto loan delinquencies, which are those arranged through a third party or auto dealer, held at 1.93 percent of all accounts.
Chessen expects delinquency levels to remain at historically low levels given low unemployment numbers.
“As the economy keeps humming along, delinquencies have stayed at very low levels,” Chessen said. “Overall, consumer financial health has been excellent. Jobs are plentiful, wages are rising, and savings rates have held steady at elevated levels, which paints a vivid picture conducive to low delinquencies. While delinquencies have held steady, the holiday season is fast approaching, and a watchful eye on budgets is the key to successfully managing debt obligations.”