Delinquencies on credit cards and home equity lines of credit continued to rise in the first quarter, according to a report released Wednesday by the American Bankers Association.
The Washington trade group said the share of credit card accounts more than 30 days delinquent rose 13 basis points from the fourth quarter, to 4.51%. It was the highest level for credit card delinquencies since the fourth quarter of 2006 and "slightly above the five-year average delinquency rate of 4.40%," the group said.
Delinquencies on home equity lines of credit rose 14 basis points, to 1.1%. That rate, though lower than in other loan categories, was the highest for home equity since 1997.
The trend was better in auto loans; delinquencies on such credits offered directly by banks climbed just two basis points, to 1.92%, and the past-due rate on loans arranged by car dealers or other third parties fell 4 basis points, to 3.09%.
James Chessen, the ABA's chief economist, said in an interview that the decline in delinquencies on "riskier" indirect auto loans was a tentative bright spot. "It's good to see that there's at least some moderation there …, but I think we'd have to wait another quarter to see if" the decline has staying power, he said.
Mr. Chessen attributed the rise in delinquencies in most categories to rising gas and food prices, falling home equity and stock values, and "very slow" personal income growth.
Sanjay Sakhrani, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc., said his company expects the unemployment rate, "usually a leading indicator in the deterioration of credit quality," to continue rising. He also pointed to recent statements by American Express Co. and Discover Financial Services, which he said have "clearly guided toward further deterioration."
Credit card delinquencies, though "a little above the five-year average," have "been fairly consistent over the last several quarters," Mr. Chessen said, but a "shift from home equity to credit cards is occurring."
"People who may have been relying on their home equity line of credit to make some expenses may be transitioning … to their credit cards," he said, and consumers who have recently lost their jobs "try to use the credit card as a bridge to maintain their lifestyle" while looking for a new job.