Consumers may be getting a better grip on credit card debt, but delinquencies are up for home-related loans. Find out more.
Delinquency rates for bank credit cards have fallen to their lowest level since 2001, but a greater share of home-related loans are overdue, according to second-quarter data released today by the American Bankers Association or ABA.
The latest Consumer Credit Delinquency Bulletin reflects both consumers’ efforts to pay down debt at a faster rate, as well as continued weakness in the housing market, according to James Chessen, chief economist for the ABA, who said, “While the housing market appears to have turned a corner, we are many quarters away from seeing improvement filter through to reduce home-related delinquencies.”
The delinquency rate for bank credit cards dropped below 3 percent for the first time in 11 years, according to the ABA, but rates are up for home equity and property improvement loans, and home equity lines of credit. A delinquent account is defined as one that is 30 days or more behind on payments.
“The lack of broad-based financial improvement gives us pause about the future,”Chessen said in a statement. “The economy experienced turbulence in the second quarter. Slow job growth and continued uncertainty means many consumers will face challenges managing their debt going forward.”
Delinquency rates for home equity loans rose by 4 percent to 4.09 percent in the second quarter, according to the ABA. Delinquency rates for home improvement loans inched up .83 percent to .9 percent, according to the ABA, and are up 1.78 percent to 1.91 percent for home equity lines of credit.
Insufficient saving and high debt levels continue to threaten the financial security of U.S. households, even the more affluent ones, according to Millionaire Corner research. Solidly middle-class investors, those with a net worth of $100,000 up to $1 million, not including primary residence, express significant levels of concern over their household budget. More than two-thirds say they are worried about having enough money to live comfortably in retirement.
Concerns are highest among investors ages 45 to 54. More than 40 percent say they will be delaying their retirement due to the “current economic environment,” and close to 40 percent say they are not saving enough to meet their financial goals. Less than half expects to live comfortably in retirement, and more than one-fourth is worried about their current debt levels.
While a growing economy and stronger job growth would help alleviate the concerns of many consumers, Chessen, of the ABA, advocates a prudent approach in the short term. “Good financial planning is the best defense against inevitable economic bumps in the road that lie ahead,” he said. “The economic path is far from certain as Europe continues to struggle and big decisions are needed to deal with the looming U.S. debt cliff.”