Credit card delinquencies are likely to remain low, even as riskier consumers open more card accounts, according to an annual forecast from TransUnion, a consumer credit reporting company.

Meanwhile, the mortgage delinquency rate is expected to fall to 5.06 percent by the end of next year, from an estimated 5.32 percent at the end of this year. (The delinquency rate is the ratio of borrowers who are at least 60 days past due on their payments. The mortgage delinquency rate peaked at the end of 2009 at 6.89 percent.)

Mortgage delinquency rates, considered a precursor to foreclosure, will fall in 34 states and the District of Columbia, TransUnion predicted.

While delinquency rates are moving in the right direction, they are dropping slowly and remain well above the historic “normal” rate of roughly 2 percent. The slow pace of improvement seems to be tied to a generally slow foreclosure process for mortgage holders who have been delinquent for a long time, said Steve Chaouki, group vice president in TransUnion’s financial services unit. The company’s analysis suggests that the delinquency rate would fall to about 2.5 percent — near normal — if borrowers who haven’t made a mortgage payment in over a year are excluded from the calculation.

The outlook remains good for credit cards, he said. Credit card delinquency rates — the ratio of borrowers who are at least 90 days behind on one or more cards — are expected to remain low, even though they may rise to 0.87 percent at the end of next year from 0.83 percent now. That’s still remarkably low. From 2000 to 2011, the rate has averaged 1.24 percent in the final three months of the year.

Mr. Chaouki said consumers are taking care to keep their credit cards current even if they are behind on their housing payments, because they have come to rely on cards as a means of liquidity in a slow economy.

Card delinquencies have moved somewhat higher in the last year, in part, he said, because the number of new cards issued has been increasing, and nonprime borrowers make up a larger share of new account holders.

Data from TransUnion shows the share of nonprime cards being issued was 29.55 percent in the second quarter of this year, compared with 23.86 percent two years earlier.

The average credit card debt per borrower is expected to rise in the next year to $5,446 at the end of 2013 from $4,996 currently. That would be the highest credit card debt level since early 2009, when average debt per borrower was $5,776.

How are you handling credit card and mortgage debt these days?

Article source: http://bucks.blogs.nytimes.com/2012/12/13/late-credit-card-payments-low-and-expected-to-stay-there/?partner=rss&emc=rss