S&P/Experian: March Mortgage Default Rates Fall
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Standard & Poor's and Experian, New York, reported first mortgage default rates fell in March, keeping consumer credit default rates relatively flat despite a jump in bank card default rates.
The S&P/Experian Consumer Credit Default Indices said data through March showed a composite default rate of 0.93 percent, down by four basis points from February. The first mortgage default fell to 0.77 percent, down seven basis points. Auto loan defaults fell to 1.02 percent, down three basis points. The bank card default rate increased by 36 basis points to 2.92 percent.
Four of the five major cities saw default rates increase during March. Miami reported a default rate of 1.15 percent, up eight basis points from February. Los Angeles recorded 0.81 percent in March, up five basis points. New York reported 0.99 percent, a two basis point increase. Chicago reported an increase of one basis point, posting a 1.03 percent default rate. Dallas was the only city to report a default rate decrease, at 0.75 percent, down 28 basis points.
"The continuing low rates of consumer credit defaults in mortgages, auto, and bank card loans are positive signs for the economy, " says David Blitzer, managing director and chairman of the Index Committee with S&P Dow Jones Indices. "Large mortgage debts followed by rapidly rising defaults in all kinds of consumer credit were key causes of the financial crisis. Conditions today are much improved; not only are defaults down, but outstanding mortgage balances were about 12 percent below the peak seen in the first quarter of 2008. Debt service ratios are close to the record lows set in the last two years as well. This all suggests that consumer spending should continue to support modest economic growth."
Blitzer noted the rate of bank card defaults is both greater and more volatile than mortgage defaults. "Mortgage balances are quite different; until the last quarter of 2014, outstanding mortgage balances declined and then saw a small increase in 2015," he said. These tell different stories about consumer behavior. While bank card balances and defaults saw increases, consumer prices were flat, indicating that the growth in balances reflects increased spending. Mortgage balances barely grew even though home prices, as measured by the S&P/Case-Shiller Home Price Index, are rising 5-6 percent annually. The substantial majority of home sales are of existing homes, which means mortgages are being paid off at the same time new mortgages are being written."