First Mortgage Default Rates at Five Year Low, Seconds at Eight Year Low

July 18, 2012 (Jeff Alan)

Default rates on first and second mortgages fell to five and eight year lows in June helping to push the S&P/Experian Consumer Credit Default Indices national composite down from 1.62 percent in May to 1.52 percent in June.

First mortgage default rates fell from 1.50 percent in May to 1.41 percent in June, the lowest rates in five years. It was the sixth consecutive month that first mortgage default rates have declined. Default rates on second mortgages also declined last month, falling from 0.88 percent in May to 0.73 percent in June, the lowest level for second mortgages in eight years.

Mortgage default rates have been steadily declining since 2009 when second mortgage default rates peaked at 4.66 percent in June 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 2.02 percent, and for second mortgages, the default rate was 1.40 percent.

Default rates on bank cards also declined, falling from 4.35 percent in May to 3.97 percent in June, while default rates on auto loans were the only category to post an increase from the previous month, increasing from 1.03 percent in May to 1.04 percent in June.

David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices, stated, “June 2012 data continued a positive trend in consumer credit quality. Consumer default rates are falling and we are approaching new lows across most loan types. In the last recession most default rates peaked in the spring of 2009; since then the decline has been bumpy but consistent.”

Four out of the five Metropolitan Statistical Areas (MSAs) saw default rates decline in the monthly Indices with Los Angeles posting the largest decline in default rates, falling 0.22 percentage points to 1.60 percent in June from 1.82 percent in May. In June 2011, the default rate in Los Angeles was 2.17 percent.

Miami posted the second largest decline, falling 0.11 percentage points to 2.44 percent in June from 2.55 percent in May which is the lowest default rate for the region since October 2006. A year ago the default rate in Miami was 5.41 percent.

The default rate in Dallas hit an eight year low, declining by 0.07 percentage points to 0.87 percent in June from 0.94 percent in May and was also down from a year earlier when the default rate stood at 1.59 percent.

The smallest decline in default rates was recorded in Chicago, which fell a modest 0.01 percentage points to 1.84 percent from 1.85 percent in May, but good enough to put the default rate in the area at its lowest level since August of 2007. In June 2011, the default rate in Chicago was 2.59 percent.

New York was the only area which saw an increase in default rates, rising by 0.03 percentage points to 1.64 in June from 1.61 in May. A year ago the default rate in New York was 1.82 percent.

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

Source:
S&P/Experian