Low Mortgage Delinquency Levels Stabilize Consumer Credit Market

DSNews   BY:  Brian Honea   November 16, 2015

Mortgage delinquency rates continued their trend of year-over-year double-digit declines in the third quarter of 2015, which contributed to the strong performance of consumer credit markets during Q3, according TransUnion’s Q3 2015 Industry Insights Report released Monday.

While aggregate revolving credit balances rose by $13.5 billion and non-revolving debt jumped by $249.5 billion year-over-year in Q3, average revolving balances declined at the consumer level by 3.9 percent down to $10,931 from Q3 2014 to Q3 2015. Increased access to credit by non-prime consumers, who typically have lower credit limits, drove the decline in average revolving balance at the consumer level. Non-revolving debt at the consumer level also declined by 0.3 percent year-over-year in Q3 down to $113,973 per consumer on average at the end of the quarter.

“Consumer credit performance continued to be healthy in the third quarter of 2015. Delinquencies for mortgages continued to drop, while both auto and credit card default rates remained near all-time lows,” said Ezra Becker, VP of research and consulting in TransUnion’s financial services business unit. “Overall balance growth reflects consumer optimism and increased access to credit. Lenders are offering credit to consumers across the risk spectrum, and consumers are using that credit responsibly. We are poised to continue this positive momentum into the holiday season.”

11-16 TransUnion GraphThe rate of delinquent mortgages, which TransUnion defines as 60 or more days overdue on a monthly mortgage payment, dropped by nearly 30 percent year-over-year in Q3 from 3.36 percent down to 2.40 percent. Q3’s delinquent mortgage rate of 2.40 percent is about 65 percent lower than its peak of 6.94 percent in Q2 2010.

“The decline in serious mortgage delinquencies is continuing and even ramping up, with steadily increasing absolute drops over the last year,” said Joe Mellman, VP and head of TransUnion’s mortgage group. “We believe this is due to a combination of factors, including strong performance by recent vintage mortgage loans, improving home prices, and the continued funneling of delinquent accounts through the foreclosure process.”

Mortgage delinquencies declined by anywhere from 27 to 30 percent in all age groups, with millennials (1.62 percent) and age 60-plus (1.77 percent) posting the lowest rates. Also, every state experienced a year-over-year decline in mortgage delinquencies; Florida had the largest decline, falling from 6.42 percent in Q3 2014 down to 3.75 percent in Q3 2015.

Click here for more insights on TransUnion’s report.

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