Consumer Delinquencies Fall in First Quarter

Delinquencies in both closed-end and open-end loans fell in the first quarter of 2016, according to the ABA Consumer Credit Delinquency Bulletin released today. The report credited consumers’ responsible management of their finances for the decline, noting lower delinquency rates in seven out of 11 individual loan categories.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 3 basis points to 1.38 percent of all accounts — continuing a three-year trend of remaining well below the 15-year average of 2.23 percent.

Delinquencies in two of the three home-related categories — home equity lines of credit and improvement loans — trended downward, falling to 1.15 percent and 0.89 percent, respectively. Delinquencies for home equity loans rose six basis points to 2.74 percent, after a 23 percent basis point drop in the previous quarter.

“As the housing continues its slow and steady recovery, consumers have more valuable equity at stake, which makes their loan payments even more of a top priority,” said ABA Chief Economist James Chessen. “Growing equity also makes new home equity loans a viable option for qualified home owners. The market for home equity loans and lines will likely continue to grow as a larger pool of qualified borrowers looks to take advantage of low interest rates to make property improvements or pay off higher-interest debt.” Chessen added that he expects low delinquency rates to continue amid stable economic conditions in the U.S. and consumers’ disciplined approach to credit.