Auto and Student Loans Push Consumer Borrowing Up in November

Jan 8th, 2014 @ 1:54 PM by Amber Nelson

Americans are starting to feel more confident in the economy these days, but only by a little bit. Consumer borrowing rose in November by its slowest pace in six months, according to a recent report from the Federal Reserve Bank of New York.

Total U.S borrowing grew by a seasonally adjusted 4.8 percent to a total of $3.09 trillion. That’s an increase of $12.3 billion; borrowing rose a downwardly-revised $17.9 billion in October, by contrast. The gain is weaker than most analysts expected with the average forecast calling for a $15 billion increase.

Most of the gain was from growth in non-revolving credit, with things like student loans and auto financing. Non-revolving credit jumped 6.4 percent in November, compared with a 0.6 percent increase in revolving credit, represented mostly by credit card spending.

Student loan borrowing has consistently been the biggest category for consumers since the Great Recession as Americans have considered student debt one of the safest liabilities. Federal government student loans increased by $6 billion in November, up from October’s $5.2 billion increase. Auto lending has also picked up in the last few years, with U.S. car sales rising 7.6 percent in 2013, but credit card borrowing has yet to make serious headway toward its pre-Recession levels. Total credit card borrowing is still 16 percent its 2008 peak.

Weak income growth and the sluggish movement of the high unemployment rates have kept consumer’s spending and borrowing in check, as proceed with financial caution until the economy is more robust. Economists do predict that borrowing will gradually rise in 2014 as the job market becomes more stable.

The Federal Reserve report is a survey of student loans, auto loans and credit card debt, but it does not include any loans related to real estate, including home mortgages.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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Auto Loan Growth Boosts June Consumer Borrowing

Aug 7th, 2013 @ 2:54 PM by Amber Nelson

American consumers borrowed more in June, with most of the increase coming from car loans and student debt, according to a recent report from the Federal Reserve Bank of New York.

Total consumer borrowing grew $13.8 billion in June from May, to a seasonally adjusted $2.85 trillion, the highest level on record.

While the Fed’s survey doesn’t break down exact numbers on auto loan data, the non-revolving credit category, which includes student and auto loans, increased by $12.6 billion in June to an unadjusted $1.987 trillion. Federal student loans grew by $3.3 billion, which means that a jump in car financing probably made up the rest of the non-revolving credit increase.

“Auto credit seems to be pretty widely available and the demand for new cars has been strong as well, and both of those are probably going to continue through the end of the year,” said Tom Simons, an economist at Jefferies LLC in New York, who projected a $14 billion increase in credit in a Businessweek article . “We still see a consumer that is reticent to borrow in order to make purchases other than autos.”

And as Simons indicated, credit card debt has not seen a major increase all year. In June, the revolving credit category, made up primarily of credit card transactions, fell $2.7 billion and is currently 16.5 percent below its peak in July 2008.

By comparison, student and car loan debt have increased $312.6 billion over the past two-and-a-half years, while credit card debt has inched up just $16 billion.

Since the financial crash, Americans seem to feel safer borrowing for cars and college than they do for more mundane needs or for big, one-time purchases. However, as the unemployment rate continues to tick downward and consumer confidence slowly recovers, we are likely to see greater borrowing of all types towards the end of the year and into 2014.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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Consumer Delinquencies Fell in Third Quarter

Jan 15th, 2014 @ 9:48 PM by Amber Nelson

Consumers did better at managing their debt in six of eight different loan categories in the 2013 third quarter, according to a recent survey from the American Bankers Association.

The ABA’s Consumer Credit Delinquency Bulletin found that all taken together Americans were delinquent – by 30 days or more – on 1.63 percent of all their loans, down from 1.76 percent in the second quarter and a record low. By comparison, the average rate of that composite ratio has been 2.35 percent for the last 15 years.

“More jobs and higher income are a recipe for lower delinquencies,” said James Chessen, ABA’s chief economis in a statement. “Consumers also continue to do a good job of monitoring their finances and keeping debt at manageable levels.”

The ABA reported that delinquencies declined in the following loan categories: personal loans, indirect auto loans, mobile home loans, RV loans, marine loans and home equity loans. Direct auto loans did not see a change in the delinquency rate at 0.88 percent, but the one increase was in property improvement loans where the number of accounts behind on payments rose to 1.25 percent in the third. quarter from 0.80 percent in the second.

The ABA also tracks a few “open-end” loans, including bank cards, home equity lines of credit and non-revolving loans. The biggest surprise among those was an jump in bank card delinquencies, which rose to 2.42 percent from 2.55 percent. Still, Chessen pointed out that even the current rate is 30 percent lower than the 15-year average.

He predicted that things will continue to get better but warned consumers to be watchful.

“Delinquencies are likely to remain at reasonably low levels for the next several quarters as the economy continues to improve and jobs and income continue to grow,” Chessen said.  “At the same time, consumers can’t afford to be complacent when it comes to keeping debt levels under control.”

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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