In the time since the end of the recession, consumers have worked hard to get their finances back in order, and in many cases, they’ve been extremely successful. However, some experts believe that trend may reverse itself next year.
Currently, rates of delinquency and default on many types of loans are hovering at or near lows not seen in a few decades, but it’s believed that in two or three cases, these nationwide rates will begin to grow again in 2013, according to new data from Fitch Ratings. Late payments on credit cards could tick up 2 or 3 percent next year, and charge-off rates could rise between 5 and 6 percent. And at the same time, it’s believed that many consumers will also fall behind on their auto loans in the coming year as well.
However, it’s important to note that both these factors will likely tick upward just because credit issuers have repeatedly broadened their lending efforts over the course of the last year in an effort to reach more customers, and as such, took on more risk, the report said. While many may attribute these personal financial problems encountered by a larger number of participants in the credit ecosystem as being related to the fiscal cliff, this is unlikely to be the case for credit cards and auto loans.
On the other hand, it’s possible that the fiscal cliff will weigh heavily on an increase in student loan delinquency and default, but likely only if there is a resolution to the controversial debate that results in a downgrade in the country’s credit rating, the report said. Already, though, student loan default rates are significantly higher than most other kinds of credit, and even what many experts predicted.
Of course, increased instances of delinquency and default on many types of credit have been expected for some time now, as experts repeatedly predicted there must be a logical point at which rates bottom out and begin progressing back toward historical norms. It’s unlikely, though, that they begin to approach the levels seen during and immediately following the recession, which were so much higher than normal.
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