American Debt Delinquicies Falling

American Bankers Association

American Bankers Association

In more positive news for the United States economy, debt delinquencies fell in the fourth quarter, showing that consumers are better managing their debts and dealing with their mortgages. The news comes from a study done by the American Bankers Association that was highlighted in a recent press release.

Delinquencies were down on all home loan related and installment loans and combined with an increase in consumer spending it appears that the economy may be about to round a corner and improve.

According to the American Bank Association chief economist James Chessen: “As jobs, income and household wealth improve, people have a greater capacity to meet their financial obligations. Improving consumer finances and closer attention to managing debt are the key factors behind these better numbers.”

The ABA defines delinquencies as a late payment that is 30 days or more overdue. The “composite ratio”, which tracks delinquencies in eight closed-end installment loan categories, fell 4 basis points to 1.59 percent of all accounts in the fourth quarter. That figure is a record low that’s well under the 15-year average of 2.34 percent, certainly an encouraging sign.

There was a fall in delinquencies in each of the three loan categories – property improvement loans, home equity loans and home equity lines of credit. This is the first time in a year that we saw delinquencies in all three loan types fall.

The ABA expects the trend to continue throughout the year and it the lower delinquency rate will help everyone with home loans achieve better loan conditions.

The delinquencies for recreational motor vehicles also fell from 1.14% to 1.10% compared to the previous year, direct auto loan delinquencies fell to 0.79% compared with 0.88% the previous year and marine loan delinquencies stayed close to the at 1.36% level of last year.

One of the few areas that delinquencies increased was with band cards where the rate went up to 2.6% from 2.55% the previous year. However that is still well below the long term average which comes in at 3.81%, a sign that consumers are well and truly being conscientious with their money and debt right now.

Of the increase in bank card delinquencies, the ABA says: “The increase in credit card delinquencies was small and not unexpected, given how remarkably low the rates are relative to historical standards,” The press release continues: “The fact that consumers are paying off more of their balances even as credit card spending increases shows that people are highly conscious of their debt obligations and actively working to keep them at affordable levels.”

All good signs for the United States economy and the recovery trend continues!

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