Ten years after the housing market collapsed, TransUnion released a report examining some of the changes to consumer credit since the Great Recession.
TransUnion’s Q2 2018 Industry Insights Report shows serious delinquency rates have recovered since the crisis.
“From a credit perspective, the financial crisis of 2008 was, and hopefully will remain, one of the most trying times in Americans’ lives,” said Matt Komos, vice president of research and consulting for TransUnion’s financial services business unit. “Unemployment rates jumped, housing values sunk to levels that caused hundreds of thousands of homeowners to go underwater on their mortgages, and the ability to gain access to credit became difficult—or the cost of credit became too expensive—for millions of consumers.”
“As a result, massive shifts in how consumers prioritized and paid their debts took place,” Komos said. “Ten years later, we have some historical perspective on the repercussions from that period, and fortunately for the overall economy, consumers are generally in a much better place today.”
The serious mortgage delinquency rate, defined as those 60 days or more past due, dropped to 1.67% in the second quarter of 2018, according to the report. This represents the lowest level since the Great Recession and is down 25 basis points from 1.92% in the second quarter of 2017.
But as delinquencies drop, TransUnion noted that the mortgage origination market is also slowing due to rising interest rates. In the first quarter of this year, mortgage originations dropped by 0.6% from the year before as the 30-year mortgage interest rate rose 14% during that same time.
“We continue to see declines in the mortgage delinquency rate, largely a result of the better credit quality of recent home buyers and a housing market which has seen sustained price appreciation,” said Joe Mellman, TransUnion senior vice president and mortgage business leader. “Despite low delinquency rates, the number of mortgage loans has hovered around 53 million in recent years.”
“In contrast, at the beginning of the decade more than 60 million mortgage loans were on the books,” Mellman said. “This shift is likely due to a combination of historically tight underwriting standards coupled with rising home prices putting pressure on home affordability, particularly at the entry-home level.”
“In fact, home ownership rates continue to remain far below recent historical averages,” he said. “The home ownership rate reached approximately 70% at the beginning of the decade, but has since declined, maintaining 64.2% since Q3 2017. Those consumers making home purchases tend to be taking on larger loans, as seen by the continued rise in average debt per mortgage borrower.”
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