After shedding more than $1.5 trillion in mortgage debt since the financial crisis, borrowers are taking on higher credit balances, covering both home financing and payment cards, according to the latest report from Equifax.
For the first time in more than three years, the total outstanding balances of home loans and bank- and retail-issued cards increased for three consecutive months. Home loans include first mortgage, home equity installment and home equity revolving balances.
From January 2013-2014, first mortgage balances increased 2.5 percent, from $7.7 billion to $7.9 billion, the largest year-over-year increase in more than 36 months.
In that same time, however, total home equity balances fell more than 6 percent, from $664.3 billion to $622.3 billion.
Meanwhile, delinquencies continue their post-crisis downward trend.
From January 2013-2014, first mortgage delinquencies (30-or-more days past due or in foreclosure) decreased 22.8 percent. In that same time, home equity installment delinquencies decreased 22 percent, while home equity revolving delinquencies decreased 10.6 percent.
“Home purchase transactions, in which first time homebuyers take on entirely new mortgage debt and move up buyers increase their existing mortgage debt, have finally overtaken foreclosures and accelerating pay-downs, resulting in increases home finance balances,” said Amy Crews Cutts, Equifax Chief Economist.
Balances on retail cards have been trending up for some time, while bank card balances have continued trending down, Cutts added. That’s probably because consumers want to “compartmentalize large purchases or take advantage of special deals tied to cards offered by retailers,” he said.
Here are other key findings from Equifax‘s National Consumer Credit Trends Report for January 2014:
Bank-issued Credit Card:
- The total number of loans outstanding is more than 315 million, the highest since October 2009;
- The total limit of new bank card credit originated January-November 2013 is $184.4, a five-year high and an increase of 12.5% from same time a year ago;
- Similarly, the total number of new card accounts issued in that same time is 39.6 million, also a five-year high and an increase of 9.5% from same time a year ago;
- Additionally, write-offs on bank card accounts have decreased 14.4% (from 4.49% to 3.85% of balances).
Retail-issued Credit Card:
- The total number of loans outstanding is more than 190 million, a 53-month high;
- The total limit of new retail card credit originated from January-November 2013 is $67.2 billion, a five-year high and increase of more than 10% from same time a year ago;
- Similarly, the total number of new retail card accounts issued in that same time is 35.9 million, the highest since 2007 and an 8.9% increase from the same time a year ago.