The national mortgage delinquency rate will be 2.51% in 2015, the lowest mark since the start of the recession in the third quarter of 2007, according to a TransUnion forecast. The study also found that the credit card delinquency rate is expected to remain well below the average historical levels throughout next year.
The national mortgage delinquency rate peaked at 6.93% in the first quarter of 2010 and since then has dropped almost every quarter, with minor upticks occurring in the third and fourth quarters of 2011.
The current reduced delinquency, low interest rates and steadily improving unemployment bodes well for the housing industry and can fuel home sales, according to TransUnion.
"We expect the national mortgage loan delinquency rate to continue its decline throughout 2015, marking four consecutive years of quarterly decreases," said Steve Chaouki, head of financial services for TransUnion. "We anticipate interest rates to remain relatively low next year and unemployment rates to continue their decline, both of which should help fuel home sales and improve consumers' ability to pay. Foreclosures are also expected to continue to funnel through the legal system in 2015, which will reduce delinquencies that have been lingering for some time. All of these factors will contribute to a further decline in mortgage delinquencies."
While the mortgage crisis has largely passed, TransUnion has found that lenders continue to take a conservative lending approach. Nearly half a million fewer subprime mortgage accounts were recorded in the last year alone, while the total number of accounts rose by nearly half a million.
"While we project that delinquencies will approach pre-recession levels, it should be noted that they will likely remain above the historic norm of 1.5% to 2%; mortgage delinquency was rising even before the official start of the recession. It is also important to note that the housing environment is far different now than it was when we last observed rates this low," Chaouki said. "Regulatory requirements and scrutiny, recent home value appreciation and consumers prioritization of payments have all changed the landscape of consumer mortgage lending."
On the consumer credit front, debt and delinquency levels are expected to remain well below historic norms, even among subprime borrowers. TransUnion predicts a 1.52% delinquency rate in the fourth quarter ending Dec. 31 with a rise to 1.53% by the fourth quarter of 2015. At the same time, the average debt per borrower is expected to rise slightly from $5,363 in this quarter to $5,396 in fourth quarter 2015.