Delinquencies on Home Equity Loans, Credit Cards Head in Opposite Directions

April 9, 2014
American Banker 
credit card news
The American Bankers Association (ABA) says delinquencies on home equity loans dropped to 3.48 percent in the fourth quarter 2013, down from a cyclical peak of 4.20 percent in the third quarter 2012 and marking the lowest level since late 2008. However, credit card delinquencies totaled 2.60 percent in the fourth quarter, reaching a five-quarter high despite being well below their late 2011 levels.

ABA chief economist James Chessen says, "The home equity delinquencies are still higher than they really should be in a normal economic environment, and there's plenty of room for those delinquencies to come down, [but credit card delinquencies have been] so low, it's hard to imagine them going much lower."

Meanwhile, a composite ratio that tracks delinquencies in eight closed-end loan categories, including home equity and auto loans, hit a record low of 1.59 percent. Although he remains concerned about people without savings or a financial buffer to cushion the blow when there is a disruption in income, Chessen says, "It's hard not to be positive when you see delinquencies declining in most categories."

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