13 March 2018

According to Moody’s, the situation was different five years ago. Although delinquency rates on mortgages remain extremely low (even less than 3 out of 1,000 borrowers are more than three months late with their payments), the possibility of increase means that lenders have to pay attention to this threat.

However, there is another problem growing. Moody’s points to risks from car loans, which are becoming longer. Today, the average new car loan in the country reaches almost 6 years. In this case, by the end of the loan term, the car value turns out less than the initial one.

“Longer consumer auto loan terms raise negative equity (the amount by which the remaining loan exceeds the collateral value), as the car value goes down faster than the loan is paid off”, – the report says.

“This deficit is often included into the initial balance of a new car loan, combining the negative equity with the credit risk.”