Default Rates on Mortgages Continue to Fall

May 18, 2012 (Jeff Alan)

Default rates on first and second mortgages declined for a fourth consecutive month in April, helping to push the S&P/Experian Consumer Credit Default Indices national composite from 1.96 percent in March to 1.86 percent in April.

First mortgage default rates fell from 1.88 percent in March to 1.76 percent in April. It was the fourth consecutive month that first mortgage default rates have declined. Default rates on second mortgages also declined last month, falling from 1.03 percent in March to 0.93 percent in April.

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

A year ago, the default rate on first mortgages was 2.16 percent, and for second mortgages, the default rate was 1.51 percent.

Default rates on bank cards also declined, falling from 4.49 percent in March to 4.47 percent in April, while default rates on auto loans reversed course from last month, increasing from 1.07 percent in March to 1.11 percent in April.

David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices, stated, “April data show the continuation of the positive trend we saw in the first quarter of 2012. Not only have we continued the general downward trend in consumer default rates that began in the spring of 2009, but we appear to be reaching new lows across many of the loan types. The first four months of 2012 show broad based declines in default rates with first and second mortgage, auto and composite default rates all reaching new post-recession lows.”

Four of the five Metropolitan Statistical Areas (MSAs) saw default rates decline in the monthly Indices with Miami posting the largest decline in default rates for the second consecutive month, falling 0.48 percentage points to 3.14 percent in April from 3.62 percent in March. In April 2011, the default rate in Miami was 5.33 percent.

New York posted the second largest decline, falling 0.23 percentage points to 1.78 percent in April from 2.01 percent in March. A year ago the default rate in New York was 2.26 percent.

The default rate in Dallas declined by 0.19 percentage points to 1.25 percent in April from 1.44 percent in March and was also down from a year earlier when the default rate stood at 1.65 percent.

The smallest decline in default rates was recorded in Chicago, which fell 0.14 percentage points to 2.21 percent from 2.35 percent in March. In April 2011, the default rate in Chicago was 2.63 percent.

Los Angeles’ default rate was unchanged from March at 1.88 percent. A year ago, the default rate in Dallas was 2.73 percent.

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

Source:
S&P/Experian