The American Bankers Association reported Thursday that late payments on a bevy of consumer loans rose to their highest point since the economy was grappling with a recession in 2001.
The group’s data revealed that the delinquency rate on a composite of consumer loans rose to 2.44 percent in the third quarter, up markedly from the 2.27 percent in the previous quarter.
The composite delinquency rate, which covers eight loan categories, was at its highest level since a 2.51 percent rate in the second quarter of 2001.
The ABA attributed some of the increase to rising oil prices and homeowner’s inability to keep up with mortgage payments.
“Consumer loans directly related to the housing market were hit the hardest,” said James Chessen, chief economist at the American Bankers Association.
“We anticipate delinquency rates will continue to rise on these types of loans in the fourth quarter of 2007, reflecting continued weakness in the housing sector.”
Late payments on home equity lines of credit climbed to 0.84 percent in the third quarter, up from 0.77 percent in the second quarter, marking the highest level since the final quarter of 1997.
Additionally, the delinquency rate on home equity loans in the third quarter rose to 2.28 percent from 1.99 percent in the prior quarter, marking a two-year high.
“My concern is that delinquencies will continue to rise, because the housing problem will worsen, and disposable income will not stretch as far,” he added. “Lenders will need to take a second or third look at any consumer loans they make.”
Interestingly, the delinquency rate on credit cards dropped to 4.18 percent in the third quarter, down from 4.39 percent in the second quarter, contrasting recent views that suggest credit cards are the next big bust.
The survey is based on information supplied by more than 300 banks nationwide, and a payment is considered delinquent if 30 or more days past due.
Source: thetruthaboutmortgage.com