While the share of residential mortgages that are seriously delinquent (60 days or more overdue) took a substantial drop to close out 2015, the average level of mortgage debt per borrower rose to its highest level post-recession, according toTransUnion’s Q4 2015 Industry Insights Reportreleased Wednesday.
The delinquencies fell by nearly a full percentage point over-the-year in the fourth quarter of 2015, from 3.29 percent down to 2.37 percent, according to TransUnion. The 28 percent decline is double the amount of decline the delinquency rate experienced from Q4 2013 to Q4 2014, and it is the largest percentage of decline since 2010 when the delinquency rate began to recover.
“Overall, the consumer credit markets are performing well,” said Joe Mellman, VP and mortgage business leader for TransUnion. “It is a positive sign that delinquency levels have remained relatively low despite more borrowers receiving credit. We have seen a continued rise in the proportion of non-prime borrowers in both the auto loan and credit card industries, and that is a likely driver for the uptick in delinquency among recently originated cohorts in those sectors. We also believe lower energy prices and the resulting job losses in energy-dependent markets have played some role in delinquency rates. Even so, that impact appears at this point to be localized, and mild in terms of national effect.”
Meanwhile, the average amount of mortgage debt per borrower climbed by 1.4 percent over-the-year in Q4, from $187,139 to $189,707—the highest level of debt per borrower since the crisis. The number of originations (viewed one quarter in arrears) spiked by 21 percent over-the-year in Q3 2015 while all risk tiers fell within 2 percentage points of the annual growth rate.
“For the first time since the ‘refi’ boom, we believe some origination activity may be attributed to ‘last chance’ refinancing to lock in a low rate before the widely-anticipated Fed Funds Rate increase in December,” Mellman said. “This sustained high level of activity is an indicator of a broadly recovering housing market.”
The fact that delinquency levels have risen by a relatively small amount as more consumers (particularly subprime borrowers) have gained access to credit products, including credit cards and auto loans, indicates that consumer credit markets are performing well.
“It is a positive sign that delinquency levels have remained relatively low despite more borrowers receiving credit,” said Ezra Becker, VP of research and consulting in TransUnion’s financial services business unit. “We have seen a continued rise in the proportion of non-prime borrowers in both the auto loan and credit card industries, and that is a likely driver for the uptick in delinquency among recently originated cohorts in those sectors. We also believe lower energy prices and the resulting job losses in energy-dependent markets have played some role in delinquency rates. Even so, that impact appears at this point to be localized, and mild in terms of national effect.”
Click here to view TransUnion’s entire Q4 2015 Industry Insights Report.
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| Justin Lee Thayer 541 543 7287 |