Default Rate On First Mortgages Rose Slightly In August But Fell Year Over Year

The default rate on first mortgages in August was about 0.68%, an increase of two basis points compared with 0.66% in July but down significantly from 0.96% in August 2015, according to the S&P/Experian Consumer Credit Default Indices.

Auto loan defaults recorded a 1.01% default rate, which is up eight basis points, while the bank card default rate was 2.86%, down six basis points from July.

The composite rate was 0.85% in August, up two basis points from July.

“Despite small monthly movements in consumer credit defaults, the overall default rates are stable and close to the lowest levels since shortly before the financial crisis,” said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a release. “Bank card default rates are more volatile and slightly higher than those tracking mortgages or auto loans. Compared to a year earlier, auto and bank card defaults rose 11 and 15 basis points, respectively; mortgage loan defaults are 16 basis points lower. The overall consumer credit picture gives little reason to be concerned about default rates.”

Blitzer added that mortgage debt peaked in the first quarter of 2008 and reached its most recent low point in the first quarter of 2015.

“It is now up 2.1% from the low,” he said. “Barring a repeat of the recent and severe recession, both consumer credit and mortgage debt outstanding are expected to continue growing at, or faster than, the pace of nominal GDP growth.”


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