Consumer delinquencies fell last quarter to their lowest point in at least 15 years, according to quarterly data released Thursday by the American Bankers Association.
The percentage of overdue closed-end loans was 1.35% in the second quarter, down three basis points from the first quarter. The ABA's so-called composite ratio tracks delinquencies in eight closed-end installment loan categories including personal, home equity and direct auto loans. It defines a delinquency as a payment that is 30 days or more overdue.
The latest figure was the lowest since at least 2001, and it marked nearly four years of delinquencies below the 15-year average of 2.21%.
A big reason for the latest decline was the 30-day delinquency rate on home equity loans, which dipped four basis points from the first quarter to 2.70%.
"Rising home prices have restored equity, providing even more incentive for borrowers to stay current with their payments," ABA Chief Economist James Chessen said in a news release.
However, home equity line delinquencies rose 6 points to 1.21%.
Overall, delinquencies fell in three of the eight closed-end loan categories compared with the first quarter. Among those on the rise were delinquencies in indirect auto loans, which rose 11 basis points to 1.56%.
The ABA studies delinquencies in three categories of open-end loans. One of those, bank card delinquencies, ticked up one basis point to 2.48%, but that figure is far below the 15-year average of 3.70%. Consumers' continued financial discipline is said to have balanced out the increase in purchase volumes.
The ABA predicts that delinquencies will hover around historic lows "over the next several quarters," in part because consumers have strong debt-to-income ratios and because bankers are said to be more cautious about gauging applicants' ability to pay. Yet risk factors lurk in the background.
"There are of course concerns surrounding the pace of the economy," Chessen acknowledged in a follow-up interview. "It's been slow the first six months, and the election has added uncertainties about what the future course of the economy will be."
Jobs data (like the monthly Labor Department report due out Friday), corporate layoffs, trends in healthcare expenses and even divorce patterns have to be watched closely, Chessen said.
"Job loss, divorce and health care costs have always been the big three drivers of delinquencies, and they will continue to be that way," Chessen said.
