TransUnion forecasts that the national mortgage delinquency rate will be 2.51% in 2015 – the lowest level since the start of the recession in the third quarter of 2007.
They expect the rate to decline to 3.21% by the close of 2014.
The study also found that the credit card delinquency rate is expected to remain well below the average historical levels throughout 2015.
From a mortgage perspective, 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.
National mortgage delinquency peaked at 6.93% in the first quarter of 2010. Since that peak, the delinquency rate has dropped almost every quarter, with minor bumps occurring in the third and fourth quarters of 2011.
“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 we project that delinquencies will approach prerecession levels, it should be noted that they will likely remain above the historic norm of 1.5 - 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.”
TransUnion has also found that while the mortgage crisis has largely passed, lenders continue to take a conservative approach.
In fact, in the last year alone, nearly half a million fewer subprime mortgage accounts were recorded, while the total number of accounts rose by nearly half a million.
From a consumer credit perspective, 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 of 2014 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.