U.S. consumers did a better job of keeping up with their loans at the end of last year, according to the American Bankers Association, signaling that the economic future looks brighter than the near past.
During the fourth quarter of 2012, delinquencies – payments that are 30 days late or more – fell in many of the categories the ABA tracks. Bank card delinquencies, for example, dropped to an 18-year low, sinking to 2.47 percent of all accounts from 2.75 percent from the previous year. The historical average is 3.87 percent.
“Consumers continue to carefully manage their finances in an effort to get debt levels under control and build up a secure financial base,” ABA chief economist James Chessen said in a statement. “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 reinforces the notion that the economic recovery has become more self-sustaining and is on a path to increased growth.”
Several other categories posted declines in late payments including personal loans, indirect auto loans, property improvement loans, home equity loans and home equity lines of credit. In fact, this was the first quarter in over a year that all three types of mortgage delinquencies decreased.
“While home-related delinquencies remain at elevated levels, even one quarter of declines could signal the start of a slow, but steady improvement. Falling delinquencies are another indicator of the housing market’s nascent recovery,” Chessen said.
Still there were a few types of loans that saw increases in their 30-day+ delinquency rates. Direct auto loans, mobile home loans, marine loans and non-revolving loans like student debt all saw rising delinquencies, cause for caution in the future.
About Amber Nelson“Make no mistake about it, a great deal of uncertainty still lingers over this economy,” Chessen warned. “Furloughs from sequestration, falling disposable income and increased healthcare and regulatory costs for businesses could lead to challenges in the year ahead.”
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.
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