Consumer Delinquencies Dip in Second Quarter

Delinquencies in closed-end loans fell slightly in the second quarter of 2016, according to the ABA Consumer Credit Delinquency Bulletin released today. The report credited a drop in home equity loan delinquencies and consumers’ continued financial discipline for the decline, noting lower delinquency rates in three of the 11 individual loan categories.

The composite ratio, which tracks delinquencies in eight closed-end installment loan categories, fell 3 basis points to 1.35 percent of all accounts — continuing the three-year trend of remaining well below the 15-year average of 2.21 percent. Home equity loan delinquencies fell 4 basis points to 2.7 percent of all accounts. Delinquencies in the other two home-related categories — home equity lines and property improvement loans — increased to 0.91 percent and 2.85 percent, respectively.

“Small ups and downs are expected, but improvement is still very much in the cards for home-related delinquencies,” said ABA Chief Economist James Chessen. “Rising home prices have restored equity, providing even more incentive for borrowers to stay current with their payments.” Chessen added that he expects to see a continued improvement in consumers’ ability to meet their financial obligations over the next several quarters as the economy improves and wages continue to rise.