Defaults Rates on First and Second Mortgages Hold Steady in August

September 21, 2011 (Jeff Alan)

Default rates on first and second mortgages remained virtually unchanged from July to August and remained well below the default levels of a year ago according to the latest S&P/Experian Consumer Credit Default Indices.

Default rates on first mortgages declined from 1.93 percent in July to 1.92 percent in August while default rates on second mortgages increased slightly from 1.25 percent in July to 1.27 percent in August.

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 July 2009.

Auto loan default rates also increased slightly to 1.31 percent in August, up from 1.27 percent in July and bank card default rates decreased from 5.64 percent in July to 5.26 percent in August.

“While there were some moderately mixed results, the overall picture is broadly optimistic,” says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices. “All indices show default rates well below where they were in the 2008/09 recession, and some are still falling. Bank cards traditionally have the highest default rates, so the decline from 5.64% in July to 5.26% in August is a good sign. The same is true for Miami, where we saw the default rates fall from 5.37% to 4.52% over the month. While not as large, the other four cities, mortgages and auto loans all saw declining or stable default rates and all of these are posting rates below 2.5%, some even below 1.5%. Again, good news for the consumer. ”

Four of the five Metropolitan Statistical Areas (MSAs) posted declines in month-over-month consumer default rates. Miami reported the largest decline from 5.37 percent in July to 4.52 percent in August, followed by Chicago which declined from 2.54 percent in July to 2.43 percent in August and Dallas’ default rate declined from 1.60 in July to 1.51 in August.

Los Angeles reported the small decline, from 2.15 in July to 2.07 percent in August while New York’s default rate remained unchanged at 1.80 percent. Default rates in all five MSAs were significantly lower than August 2010.

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

Source:
Standard and Poor