Mortgage delinquency is predicted to fall to a 13-year low next year, while the origination of home-secured credit lines over the next five years is expected to double.
Delinquency of at least 60 days on U.S. residential loans outstanding as of the third quarter was previously reported at 1.91 percent.
But by the end of this year, the rate is expected to fall to 1.83 percent, a 45-basis-point improvement from the fourth-quarter 2016.
That is according to
the 2018 Consumer Credit Forecast released Wednesday from TransUnion.
By the fourth-quarter 2018, TransUnion predicts delinquency will drop to 1.65 percent — marking the lowest 60-day rate since 2005.
Matt Komos, vice president of research and consulting for TransUnion, noted in the report that the improvement will be driven primarily by strong employment and rising home prices.
“Additional factors impacting lower mortgage delinquency rates include increases to the labor participation rate, median household income, and home equity levels,” the report stated. “Consumer-level mortgage delinquency rates have now declined almost every quarter since peaking at 7.21 percent in Q1 2010.”
Average outstanding loan amounts are forecasted to go from $200,935 in the fourth-quarter 2017 to $205,534 in the final-three months of next year.
TransUnion predicts that refinance share will thin from 35 percent this year to 28 percent in 2018.
Meanwhile, the production of home-equity lines of credit is expected to be 1.6 million next year. Through 2022, 10 million HELOCs are expected to be originated.
“This is in stark contrast to the previous five-year period, when less than half that number were originated — 4.8 million HELOCs were opened between 2012 and 2016,” the report stated. “TransUnion believes the three largest uses for these new HELOCs will be: 1) debt consolidation to a lower interest rate; 2) financing a large expense, such as a home improvement; and 3) refinancing an existing HELOC or home-equity loan. ”
