Overall, late-payment rates on consumer loans declined significantly in the fourth quarter of 2012, with bank credit card delinquencies falling to levels not seen since the third quarter of 1994, according to a new report from the American Bankers Association.
Bank card delinquencies fell 28 basis points to 2.47 percent – an 18-year low and well below the 15-year average of 3.87 percent.
The composite ratio for delinquencies in eight closed-end installment loan categories, such as auto and personal loans, fell 17 basis points to 1.99 percent of all accounts in the fourth quarter. That’s below the 15-year average of 2.39 percent.
The ABA’s report defines a delinquency as a late payment that is 30 days or more overdue.
The ABA said the improvement in late-payment rates is due to continuing efforts by consumers to reduce debt and build financial security against future economic uncertainties — lessons that came fast and hard in the five to seven years since the housing market collapse and financial crisis.
“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” said James Chessen, ABA’s chief economist. “While this conservative approach to credit may slow economic growth in the short-term, it portends stronger, more consistent growth in the future.
The sharp decline in delinquencies is proof that the economic recovery may have become more self-sustaining, he said.
Chessen said that delinquencies in all three home-related loan categories – property improvement loans, home equity loans and home equity lines of credit – fell in the fourth quarter.
This is the first time all three of these categories have seen delinquencies decline since the fourth quarter of 2011.
“While home-related delinquencies remain at elevated levels, even one quarter of declines could signal the start of a slow, but steady improvement,” Chessen said. “Falling delinquencies are another indicator of the housing market’s nascent recovery.”
But he cautioned that a great deal of uncertainty still lingers over the economic recover, with “furloughs from sequestration, falling disposable income and increased healthcare and regulatory costs for businesses” posing challenges in the year ahead.
The fourth quarter 2012 composite ratio is made up of the following eight closed-end loans. All figures are seasonally adjusted based upon the number of accounts.
- Personal loan delinquencies fell from 2.14 percent to 2.08 percent.
- Direct auto loan delinquencies rose from 0.95 percent to 0.96 percent.
- Indirect auto loan delinquencies fell from 2.08 percent to 1.85 percent.
- Mobile home delinquencies rose from 3.51 percent to 3.53 percent.
- RV loan delinquencies held steady at 1.27 percent (no change).
- Marine loan delinquencies rose from 1.55 percent to 1.57 percent.
- Property improvement loan delinquencies fell from 0.89 percent to 0.83 percent.
- Home equity loan delinquencies fell from 4.20 percent to 4.03 percent.
- Bank card delinquencies fell from 2.75 percent to 2.47 percent.
- Home equity lines of credit delinquencies fell from 1.93 percent to 1.85 percent.
- Non-card revolving loan delinquencies rose from 1.28 percent to 1.31 percent.