July 22, 2011 (Jeff Alan)

Consumers continued to exhibit financial fortitude in spite of high unemployment and fuel prices as default rates continued to decline across the major consumer credit categories according to the latest S&P/Experian Consumer Credit Default Indices.

The report shows that first and second mortgage default rates decreased in June to 2.02 percent and 1.40 percent, respectively, from 2.09 percent and 1.42 percent in May.

Mortgage default rates have been on the decline since March 2009 when second mortgage default rates peaked at 4.66 percent, followed two months later when first mortgage default rates peaked at 5.67 percent in May 2009.

Auto loans and bank cards also continued to see declines in default rates. Auto loan default rates fell to 1.29 percent in June, down from 1.34 percent in May and bank card default rates decreased from 5.93 percent in May to 5.69 percent in June.

“Default rates are continuing to decline across major consumer credit categories,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “More importantly for the economy, the Federal Reserve reported that revolving credit – which includes bank cards – rose in May for the first time since 2008. Combined with the improving default experience we are seeing this is a positive sign for an economy suffering from a lack of consumer spending. Looking at the five leading cities highlighted in this report, the lingering effects of the housing bust can be seen in the Miami where default rates remain higher than the other cities.”

Despite the overall improvement, three of the five Metropolitan Statistical Areas (MSA) reported increases in month-over-month default rates. Chicago reported the largest increase from 2.37 percent in May to 2.59 percent in June, while Dallas and Miami reported moderate increases to 1.59 percent and 5.41 percent in June from 1.58 percent and 5.31 percent in May, respectively.

New York reported a decrease in default rates from 1.94 percent in May to 1.82 percent in June, while Los Angeles saw its default rates fall to 2.17 percent in June from 2.39 percent in May.

Tags: S&P, Experian, Consumer Credit Default Indices, mortgage default rates, auto loan default rates, bank card default rates