Delinquency rates are down over last year across nearly all forms of credit, except one—student loan debt, where delinquency rates are on the rise as people struggle with paying off debt. Third-quarter delinquencies for auto loans, consumer finance, credit cards, mortgage loans, home finance, and home equity all decreased from the same period last year, and most delinquency rates have been slowly dropping since their high in the middle of 2010.
First mortgage delinquency rates
First mortgage delinquency rates saw the greatest leaps—from 5 percent in 2007 until their spike in 2010 at a little more than 12 percent. Since then, the rate has slowly declined, now hovering at around 8 percent of total first mortgage loans, though it still remains elevated over pre-recession figures. Additionally, first mortgage 30-day plus delinquency rates declined 16 percent from the end of the third quarter 2011 to the same period in 2012.
Home finance and home equity revolving lines of credit
Along with first mortgage rates, delinquency rates for home finance and home equity revolving lines of credit have also dropped, but they remain higher than their pre-recession rates. Home equity revolving 30-day plus delinquency rates declined 13 percent over last year, while home finance delinquency rates dropped 15 percent.
Some of this decrease could be credited to consumers refinancing existing mortgage debt at lower rates, along with the overall decline in mortgage debt due to foreclosures, homeowners paying down debt faster through cash-in financing, or consumers shortening their mortgage terms and paying more each month.
Other declines in delinquency rates: Credit cards, auto loans, and more
Consumer finance, bank, and retail credit card delinquency rates of 60 days or more declined as well. Delinquencies in consumer finance, primarily with unsecured lines or loans, have dropped 15 percent, bank credit card delinquency rates have dropped 20 percent, and retail card delinquency rates have decreased 13 percent. Nationwide credit card delinquency rates are actually lower than pre-recession levels.
Meanwhile auto loan delinquency rates have also declined 20 percent and have landed at below pre-recession levels.
Both credit card delinquency and auto loan delinquency rates hovered at around 5 percent pre-recession and have landed at about 3 percent at third quarter’s end, indicating a consumer improvement in credit management.
What’s going on with student loan debts?
Consumer cautiousness, described by Equifax Personal Solutions President Trey Loughran as the “disciplined consumer,” has not extended to the student loan world. Recent graduates may have been struggling to find jobs with an income level high enough to help with paying off their debt.
- Student loan 60-day delinquency rates increased more than 16 percent year-to-year in the third quarter.
- Student loan balances increased year over year by $61 billion to $808 billion total.
- Student loan debt has grown from $400 billion in mid-2007 to $800 billion by the end of September 2012.
- The number of loans in that same period increased from 50 million to 120 million.
Additionally, there has not been the same push for tighter underwriting standards or guidelines to ensure a loan is safe and secure as there has been with other loans since the start of the recession. Also, unlike with mortgages or credit card debt, which can be wiped out through foreclosure or bankruptcy, student debt must be repaid. With the price of college increasing faster than rate of inflation, student loan debt will likely continue to grow.
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