National Mortgage Default Rate Continues To Decline

The national default rate on mortgages declined in May compared to April, while the default rate for auto loans and credit cards increased slightly, according to the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults.

The national composite posted 1.04% in May – the lowest default rate since May 2006, according to the report. The default rate on first mortgages continued to decline, from 1.01% in April to 0.92% in May. Defaults on second mortgages also declined from 0.63% in April to 0.57% in May.

Meanwhile, auto and bankcard default rates increased. After setting new historic lows in March and April, the auto loan rate increased marginally by one basis point to 0.93%, while the bank card rate was 2.97%, up 13 basis points over the prior month

‘Consumer credit default rates decreased for their seventh consecutive month,’ says David M. Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices, in a release. ‘The national composite is now only one basis point above its historic low.’

‘Mortgage default rates saw the biggest decline when compared to auto and bank card rates,’ Blitzer says. ‘Although historically low default rates are welcome, some home buyers may have difficulty qualifying for mortgages. Last year saw a surge in home prices but we are seeing signs of slowing gains this year. One question is whether banks are willing to make mortgage loans as home prices rise faster than incomes.’

Blitzer points out that New York was the only city to see its default rate increase – however, it showed the largest drop-off from one year ago.

‘Dallas posted a new historic low of 0.77 percent while Chicago, Los Angeles and Miami are at their lowest default rates since the start of the last recession,’ he says. ‘Miami continues to maintain the highest default rate of 1.74 percent while Dallas maintains the lowest rate of 0.77 percent.’

Blitzer adds that the five largest U.S. cities – Chicago, Dallas, Los Angeles, Miami and New York – all remained below default rates seen a year ago.

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