S&P/Experian: Consumer Credit Default Rates Up in October


Data from S&P Dow Jones Indices and Experian, New York, for the S&P/Experian Consumer Credit Default Indices showed small increases in national default rates in October.

The composite default rate, first mortgage default rate and auto loan default rates all increased by three basis points last month to 0.87%, 0.70% and 1.08%, respectively, in October. The bank card default rate remained unchanged from last month at 2.76%.

Four of the five major cities saw their default rates increase in October. Chicago saw the largest increase, reporting 0.97%, up 10 basis points from September. New York saw its default rate increase by seven basis points to 0.93%, while Los Angeles reported an increase to 0.62%, up three basis points. Dallas reported a default rate of 0.76%, up two basis points. Miami was the only city reporting a default rate decrease of six basis points to 1.06%.

“Consumer credit and mortgage debt outstanding are rising and economic growth picked up in the third quarter,” said David Blitzer, Managing Director & Chairman of the Index Committee with S&P Dow Jones Indices. “These positive signs are accompanying small increases in the consumer credit default rates…With recent reports showing improved consumer sentiment and the holiday spending season fast approaching, default rates may bear scrutiny.”

Blitzer noted interest rates are likely to rise over the next year and may put upward pressure on consumer credit interest rates and lending terms. “Most analysts expect the new Administration to expand federal spending and cut taxes–two forces likely to push interest rates higher,” he said. “For consumers, higher interest rates will be seen first in mortgages.”