Consumer Credit Default Rates Increase in December

1/20/2017 1:35 PM

Bank card default rates posts the biggest gain and composite rates in large U.S. Cities continued to increase.


Auto loan, first mortgage, bank card default and composite default rates increased slightly in December, according to the S&P Experian Consumer Credit Default Indices released Jan. 17.

In December, the bank card default rate increased 14 basis points from November 2016, marking an increase of 46 basis points from compared to December 2015.

The first mortgage, auto and composite default rates also increased in December, while the second mortgage default rate declined.

“National average consumer credit default rates continue at low levels in an improving economy,” said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices in a news release. “Auto and light truck sales were up each month since August as automobile consumer credit defaults held steady. Bank card sector defaults ticked up slightly in the last two months, reversing five months of flat to down reports. This may reflect rising retail since the spring and larger consumer credit extensions in October and November. Nationally, mortgage default patterns are also stable. This favorable picture is likely to be tested by rising interest rates; home mortgage rates rose by three-quarters of one percent since Election Day.”

The S&P/Experian comprehensive measure of changes in consumer credit defaults shows a composite rate of 0.89 percent in December, two basis points higher than the November rate. The auto loan default rate increased three basis points to 1.03 percent while the first mortgage default rate increased three basis points to 0.71 percent. The second mortgage rate declined seven basis points from November to 0.41 percent.

The S&P/Experian report also tracks default rates in major U.S. cities and four of the five cities reported higher default rates.

Miami experienced the largest increase, by nine basis points, to 1.53 percent in December. The rate in Chicago increased two basis points to 0.98 percent and in Los Angeles it increased two basis points to 0.72 percent. Dallas reported an increase of one basis point to 0.72 percent and New York experienced a decline of four basis points to 0.87 percent.

Blitzer notes the composite default rate in Miami is at a 30-month high.

“Consumer credit default rates and economic conditions vary across the country. Among the five cities reported on each month, Miami has a larger and increasing first mortgage foreclosure rate,” Blitzer said. “Home prices in Miami, as in most cities, have recovered from the financial crisis. However, Miami home prices, as measured by the S&P CoreLogic Case-Shiller Home Price Index, as of October 2016 were 22 percent below their December 2006 peak, while nationally, home prices have recently surpassed the pre-crisis peak set in July 2006. Florida also lags national trends in other measures – it is among the five states with the most foreclosures in 2016.”

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