Loan Default Rates Continue Downward Trend

October 30, 2012 (Jeff Alan)

Default rates for most consumer loan types continued their downward trend in September helping to push the S&P/Experian Consumer Credit Default Indices national composite down to 1.46 percent from 1.50 percent in August, a post recession low.

First mortgage default rates moved lower again last month, falling from 1.40 percent in August to 1.36 percent in September. It was the ninth consecutive month that first mortgage default rates have either declined or remained unchanged from the previous month.

Default rates on second mortgages also declined, falling from 0.72 percent in August to 0.64 percent in September. Second mortgage default rates were at their lowest level in over eight years.

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

A year ago, the default rate on first mortgages was 1.99 percent, and for second mortgages, the default rate was 1.32 percent.

Default rates on bank cards also continued to decline, falling from 3.77 percent in August to 3.70 percent in September, while for the second consecutive month, default rates on auto loans were the only category in the Index to see a monthly increase, climbing from 1.09 percent in August to 1.11 percent in September.

Last year at this time, the default rate for bank cards was 5.36 percent while auto loans had a default rate of 1.29 percent.

David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Indices, stated, “We think it is very fair to say that 2012 has proven to be a period of financial repair for consumers. Consumers’ financial condition continues to improve as witnessed by these declining credit default rates.

All five of the Metropolitan Statistical Areas (MSAs) saw their composite default rate decline in the monthly Indices. New York posted the largest decline, falling 0.21 percentage points to 1.28 percent in September from 1.49 percent in August. A year ago the composite default rate in New York was 2.01 percent.

New York was followed by Los Angeles which saw its default rate fall 0.15 percentage points to 1.45 percent from 1.60 percent in August. The composite default rate in Los Angeles was 2.12 percent a year ago.

Miami saw its default rate improve by 0.14 percentage points, falling from 2.62 percent in August to 2.48 percent in September. Last year the composite default rate in Miami was 4.59 percent.

The default rate in Chicago fell 0.10 percentage points in September, declining from 1.92 percent in August to 1.82 percent. A year ago the composite default rate in Chicago was 2.47 percent.

Dallas posted the smallest decline in default rates, 0.04 percentage points, falling from 1.07 percent to 1.03 percent in September. Last year, Dallas also had the lowest composite default rate of 1.33 percent.

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

Source:
S&P/Experian