Record severe delinquency rates – loans 60-or-more days past due – are the key reason that subprime annual percentage rates have increased in a year in which bond yields have decreased, Jonathan Smoke, chief economist at Cox Automotive, told Auto Finance News. Delinquency rates for subprime accounts notched 5.38% of total volume in November, according to Equifax data. “The higher rate is compensation for higher risk,” he added.
“That is the highest subprime severe delinquency rate for November in the entire data series going back to 2006,” Smoke said. “Prior to November, the highest that the subprime delinquency rate reached during the Great Recession was 5.37% in January 2009.”
Across all credit tiers, severe delinquencies amounted to 1.53% of the total volume in November, the highest rate for the month in the past 10 years. By comparison, the highest severe delinquency rates for all loans across all months was 1.88% in January 2009, Smoke said.
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