Default Rates near Eight-Year Lows

 "There is only positive news in June's numbers," a spokesperson for S&P Dow Jones Indices said today as the company released the S&P/Experian Consumer Credit Default Indices.  Eight of the ten measures of the index decreased during the month and many are at historic lows.

The Composite Index and four of its five components were decreased during the month.  The Composite was down 10 basis points from May to 1.52 percent.  It had been at 2.14 percent in June 2011.  The First Mortgage Index fell to 1.41 percent from 1.50 in May and 2.02 in June 2011 and is now back to its May 2007 level after peaking at 5.67 percent in May 2009. 

The Second Mortgage rate was 0.73 percent compared to 0.88 and 1.40 percent in the two earlier time periods. The June figure is the lowest point for this component in the Indices' eight year history.  

The index measuring bank card defaults was at 3.97 percent, 38 basis points below the May number of 4.35.  It was 5.69 percent a year earlier.  Only the auto loan component rose and then only one basis point to 1.04 percent from 1.03 percent, its historic low. The Auto Index was 1.29 percent a year earlier.

David M. Blitzer, Managing Director and Chairman of the Index Committee for the company said "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.

S&P Experian tracks five cities and four of them saw default rates drop in June and are now at post-recession lows.  Only New York was up, increasing by 3 basis points from 1.61 percent in May to 1.64 percent in June.  As can be seen in the chart below, Miami has made significant strides, cutting its default rate by more than half over the last 12 months.

"In the past three years," Blitzer said, "households have come a long way in repairing their balance sheets.  Looking across our 10 headline indices, only one - bank cards - shows default rates above 2.5 percent and even those are close to their eight year historic low."