Consumer Credit Delinquencies Reach All-Time High

Anthony Haddad's picture

Monday, July 13, 2009 - 4:55pm

by Anthony Haddad

The American Bankers Association said consumer-credit delinquencies rose to 3.23% of all accounts in the first quarter of 2009. Delinquencies on bank-card accounts rose to 4.75%. The percentage of consumers at least 30 days late making a payment is the highest since the group began keeping records in 1974:

Type of Loan Delinquency Rate Q1 2009 Previous
Quarter
Percentage
Change
Home Equity 3.52% 3.03% 16.17%
Property Improvement 1.46% 1.75% -16.57%
Indirect Auto 3.42% 3.53% -3.12%
Direct Auto 3.01% 2.03% 48.28%
Marine 2.04% 2.35% -13.19%
RV 1.52% 1.38% 10.14%
Mobile Home 3.70% 2.96% 25.00%
Personal 3.47% 2.88% 20.49%

The highest delinquency rates come from credit card accounts, followed by mobile homes, homes, and personal loans. This is not surprising with the problems with home lending and the unsecured nature of credit cards and personal loans.

FDIC statistics show that, in aggregate, 3.8% of loans were past due as of the end of the first quarter. Mortgage lenders and international banks have taken the biggest hit; their non-current loan rates now stand at 4.2% and 4.9%, respectively.

Unemployment is behind the credit picture. Labor Department statistics show more than 3.5 million people lost their jobs in the first six months of 2009, bringing the unemployment rate to 9.5%, a 26-year high. The total percentage of employed Americans now sits at 59.5%, the lowest rate since 1984.

On top of this, Americans saw their net worth shrink by $1.3 trillion in the first three months of this year, according to data by the Federal Reserve. This has been largely due to shrinking home and stock values.

Borrowing fell by $3.3 billion in May, according to Federal Reserve Data. In April, it fell by $16.5 billion, the second largest cut on record since 1943. The largest reduction -- $16.6 billion -- happened in March. The total amount of debt now carried by consumers is $2.524 trillion.

The growing default rate won't turn around until the jobs numbers begin to head in the other direction, and companies who are in the business of lending to consumers will have to continue to endure increasing default rates for months to come.

Anthony Haddad does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.