Banks Saw More Home Equity Loans Overdue in Third Quarter '08
Washington-The delinquency rate on home-equity lines of credit reached its highest level ever in the American Bankers Association's third-quarter 2008 consumer credit delinquency bulletin.
The HELOC overdue rate rose seven basis points from the second quarter to 1.15% in the third, according to the ABA. The percentage of closed-end home-equity loans that were past due rose to 2.63% from 2.56% in the previous quarter.
The delinquency rates on property improvement and mobile home loans also increased during the third quarter.
ABA chief economist James Chessen said that the data is further evidence that consumers are under financial stress, noting that economists are projecting job losses totaling 2.5 million for the year. He predicts that delinquencies on all types of consumer loans will continue rising in the coming quarters.
The ABA's composite consumer loan delinquency ratio, which is based on eight different types of closed-end loans, rose 22 basis points to 2.9% in the third quarter of last year.
The bank-issued credit card category was one of only two that showed a decline in delinquencies, dropping 34 basis points to 4.2% of all accounts. The ABA report defines a delinquency as a late payment that is 30 days or more overdue.
"While some people are relying on credit cards to meet daily expenses like food and gas, many are being careful not to add new debt. Reducing debt and building up cash reserves are good strategies right now," Mr. Chessen said in a news release.