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Despite a Rough Recovery, Consumers Still Paying Down Debt

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 (REUTERS)

Consumers continued to pay down debt in the third quarter of 2012, but slow job growth and the expiration of a tax cut could mean it will become more difficult to repay loans, the American Bankers Association said on Thursday.

Delinquencies on bank card payments fell to an 18-year low during the quarter, and a composite ratio covering late payments in eight loan categories also fell, the group said.

But delinquencies rose in five of those eight categories, the ABA said.

And consumers could see lower income because Congress did not extend a temporary reduction in the Social Security payroll tax, which could hurt consumers' ability to repay loans in the future, James Chessen, ABA's chief economist, said in a statement.

"The conservative approach consumers have taken to credit over the last several years has allowed them to better manage their debt and better position themselves for the future," Chessen said.

"Changes in payroll withholding will decrease disposable income, reducing retail sales and making it more difficult for some people to meet their financial obligations," he said.

He said low consumer confidence in the economy also could indicate more delinquencies are on the way. A recent measure of U.S. consumer attitudes showed confidence at a four-month low.

The ABA tracks late payments for bank-provided credit cards, auto loans and other consumer loans. It does not track delinquency rates for traditional mortgage payments.

The bank association defines a delinquency as a late payment that is 30 days or more overdue.

The composite ratio's delinquency rate fell to 2.16% of all accounts in the third quarter from 2.24% in the second quarter, the ABA said.

Bank card delinquencies, which are not part of the composite, fell to 2.75% during the quarter, the lowest level since 1994, the group said.

Bank Rates

Loan Type Graph Rate +/- Last Week
30 Y Fixed Graph 4.22% dw 4.27%  
15 Y Fixed Graph 3.19% dw 3.24%  
30 Y Fixed Jumbo Graph 4.37% dw 4.42%  
5/1 ARM Graph 3.30% dw 3.33%  
5/1 Jumbo ARM Graph 3.35% dw 3.38%  
Loan Type Graph Rate +/- Last Week
$30K HELOC Graph 4.38% dw 4.54%  
$50K HELOC Graph 4.06% dw 4.09%  
$30K Loan Graph 5.07% dw 5.08%  
$50K Loan Graph 4.55% dw 4.56%  
$75K Loan Graph 4.55% dw 4.56%  
Loan Type Graph Rate +/- Last Week
36 M New Graph 3.06% -- 3.06%  
36 M Used Graph 3.28% dw 3.29%  
48 M New Graph 3.05% up 2.96%  
48 M Used Graph 2.88% dw 2.96%  
60 M New Graph 3.08% dw 3.21%  
Loan Type Graph Yield +/- Last Week
6 month Graph 0.36% -- 0.36%  
1 yr Graph 0.60% -- 0.60%  
5 yr Graph 1.45% up 1.44%