Wednesday, January 23, 2013

Consumer Loans Continue to Decline as of Q3 2012 Except for Student Loans

In spite a reduction in consumer borrowing student loans continue to increase.  I am sure it is some type of "can't find a job then go to school" coupled with the cost of college is increasing. By the way, serious delinquency, that is 90+ dpd (days past due) is now over 10%.  Fairly serious delinquency problems.  What happens when the students graduate and they cannot find a job?  What happens when they pay too much for college and they cannot afford the debt?  When happens when they graduate in a major they do not like?  A lot to think about before one takes on that much debt.  This article is from the NY Federal Reserve Bank:

In its latest Quarterly Report on Household Debt and Credit, the Federal Reserve Bank of New York announced that in the third quarter, non-real estate household debt jumped 2.3 percent to $2.7 trillion. The increase was due to a boost in student loans ($42 billion), auto loans ($18 billion) and credit card balances ($2 billion).

The Quarterly Report on Household Debt and Credit is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative random sample drawn from Equifax credit report data. During the third quarter of 2012, total consumer indebtedness shrank $74 billion to $11.31 trillion, a 0.7 percent decrease from the previous quarter. The reduction in overall debt is attributed to a decrease in mortgage debt ($120 billion) and home equity lines of credit ($16 billion), despite mortgage originations increasing for a fourth consecutive quarter.

“The increase in mortgage originations, auto loans and credit card balances suggests that consumers are slowly gaining confidence in their financial position,” said Donghoon Lee, senior economist at the New York Fed. “As consumers feel more comfortable, they may start to make purchases that were previously delayed.”

Outstanding student loan debt now stands at $956 billion, an increase of $42 billion since last quarter. However, of the $42 billion, $23 billion is new debt while the remaining $19 billion is attributed to previously defaulted student loans that have been updated on credit reports this quarter.1 As a result, the percent of student loan balances 90+ days delinquent increased to 11 percent this quarter.2

Other highlights from the report include:
Outstanding auto loans ($768 billion) are the highest in nearly four years.
Auto loan balances increased for the sixth consecutive quarter.
Mortgage debt at $8.03 trillion is at its lowest level since 2006.
Delinquency rates for mortgages decreased from 6.3 percent to 5.9 percent.
HELOC delinquency rates remain high by historical standards (4.9 percent).
New foreclosures are returning to their pre-crisis levels, as about 242,000 consumers had a new foreclosure added to their credit report, the lowest in nearly six years.
Mortgage originations, which we measure as the appearance of new mortgages on consumer credit reports, rose to $521 billion, the fourth consecutive quarterly increase.

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