Fitch: US Household Debt Drop Supports Strong ABS Metrics

Strong credit card ABS metrics will continue, Fitch Ratings says, as the decline in total household debt is making it easier for cardholders to service their credit card debt. According to a Federal Reserve report last week, total U.S. household debt has fallen from a peak of 135% in 2007 to 108% in the third quarter of this year. This is the lowest level in more than 10 years.

Credit card ABS metrics have been strong throughout most of this decline in debt and are expected to continue this trend in the near term. We expect prime chargeoffs to rise slightly after hitting an all-time low last month, and prime 60+ day delinquencies will likely remain unchanged. Prime gross yield is likely to decline slightly. And the monthly payment rate (MPR), which hit all-time highs in the 3Q14, will likely log its ninth straight decrease in December.

Retail metrics are also likely to stay in their seasonal trend range. Retail chargeoffs will increase, while retail 60+ day delinquencies will rise only slightly. The retail gross yield is likely to rise within its seasonal band. And retail MPRs will decrease slightly after reaching record levels this year.

These expectations reflect the November reporting period and December distribution date. Actual results will become available in January.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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