S&P/Experian: First Mortgage Default Rate Hit One-Year High In March

The default rate on first mortgages was about 0.75% in March – up slightly from 0.74% in February but down from 0.77% in March 2016, according to the S&P/Experian Consumer Credit Default Indices.

The default rate on second mortgages was about 0.57%, up significantly from 0.51% in February but down from 0.59% in March 2016.

The report also covers the national default rate on credit cards and auto loans. The default rate for credit cards in March was estimated at 3.31%, up significantly from 3.22% in February and from 2.92% in March 2016 to reach the highest level in 45 months.

The default rate for auto loans was 1.00%, down from 1.05% in February and down from 1.02% in March 2016.

“The continuing low consumer credit default rate reflects recent strong job growth and a favorable economy,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement. “The economy is also supporting consumers’ positive outlook and strong sentiment about the economy and their financial condition. Data from the Federal Reserve shows that consumer credit continues to expand at more than six percent per year – the highest pace since 2007-2008. Other Federal Reserve data indicate that household net worth in 2015 and 2016 rose 2.3 percent each year.

“Currently, the debt service ratio for consumer credit – the percentage of disposable income required to service consumer credit debt – is 5.58 percent, up from its recent low of 4.92 percent in 2012 but lower than the 6.01 percent peak seen shortly before the financial crisis,” Blitzer adds. “The higher interest rates that most analysts expect over 2017-2018 are likely to combine with continued growth in consumer credit to push the debt service ratio back towards the six percent level.”


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