Default Rates on First Mortgages Rise for Second Consecutive Month

November 17, 2011 (Jeff Alan)

Monthly default rates on first mortgages rose for the second consecutive month in October according to the latest S&P/Experian Consumer Credit Default Indices, while the default rates on all other types of loans declined during the month.

Default rates on first mortgages increased from 1.99 percent in September to 2.08 percent in October, while default rates on second mortgages declined from 1.32 percent in September to 1.29 percent in October.

Mortgage default rates have been steadily declining since 2009 when second mortgage default rates peaked at 4.66 percent in March, followed several months later by first mortgage defaults which peaked at 5.67 percent in August.

Default rates on auto loans improved in October with rates decreasing slightly to 1.22 percent in October, down from 1.29 percent in September, while default rates on bank cards improved the most, decreasing from 5.36 percent in September to 4.85 percent in October.

“This month’s data show how much weight first mortgage default rates have in the national composite, about 84%,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “Auto loan, second mortgages and especially bank cards all saw pretty significant drops in their default rates. However, the national composite rose with first mortgages. Home purchases are obviously very large investments, so first mortgage loans are substantially larger than any other consumer loan type. Consequently, when such a loan goes into default it is more serious from the perspective of the consumer’s overall financial status than the others. This is the second time we have seen the rates go up for first mortgages since November 2010.”

Three of the five Metropolitan Statistical Areas (MSAs) posted increases in their month-over-month default rates in stark contrast to last month when four out of the five MSAs posted declines in their default rates.

Chicago posted the largest default rate increase in the monthly Index, moving up 0.17 percentage points to 2.64 in October from 2.47 percent in September. New York followed with an increase of 0.8 percentage points to 2.09 percent in October, up from 2.01 percent in September, and the default rate in Los Angeles increased 0.3 percentage points to 2.15 in October, up from 2.12 percent in September.

Miami posted the largest decline in monthly default rates, falling 0.43 percentage points to 4.16 percent in October, down from 4.59 percent in September. Dallas posted a slight decline in their default rate, falling 0.03 percentage points to 1.30 percent in October, down from 1.33 percent in September.

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

Source:
Experian