Consumer Loan Defaults Hit New Lows while Mortgage Defaults Rise

Default rates for first mortgage loans increased in both October and November according to the S&P Dow Jones Indices and Experian.  The increases drove the national default rate up from a post recession low reached in September despite continued improvements in the performance of  second mortgage, credit card, and auto loans.  

The national composite index increased from 1.46 percent in September to 1.55 percent in October and 1.64 percent in November.  First mortgages had also hit a post-recession low in September of 1.36 percent but rose 11 basis points in October and reached 1.48 percent in November.  In contrast auto loan defaults rates dropped from 1.14 percent in October to 1.09 percent in November and second mortgages decreased slightly from 0.65 percent in October to 0.62 percent, a historic low.  The bank card default rate is at a new post-recession low after falling 10 basis points to 3.58 percent.

 "The national composite showed an increase in consumer credit default rates for the second consecutive month in November", says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "This increase in national default rates was solely driven by an increase in the first mortgage default rate. All other loan types - auto loan, bank card and the second mortgage posted decreases in their default rates in November.

"While the increase in the first mortgage default rate is quite small, it bears watching since it repeats across four of the five cities we track. The other sectors all posted small declines from October to November: auto loans down 5 basis points, bank cards down 10 basis points to a new post-recession low of 3.58% and second mortgages down 3 basis points."

"Four out of five cities we cover showed increases in their default rates. Dallas saw defaults slip one basis point. The increases were Miami, up 22 basis points, Los Angeles up 16, New York up 12 and Chicago higher by 7 basis points.  Miami had the highest default rate at 2.66% and New York was lowest at 1.47%."