S&P/Experian: Mortgage Default Rates Hold Steady

Overall credit default rates, including first mortgage defaults, held steady in November, S&P Dow Jones Indices and Experian reported yesterday.

The S&P/Experian Consumer Credit Default Indices said the composite rate and first mortgage default rate remained unchanged from October at 0.87% and 0.7%, respectively. Auto loan defaults recorded a 1.00% default rate, down eight basis points from October. The bank card default rate came in at 2.81%, up five basis points.

Three of the five major cities saw their default rates decrease in November. Dallas had the largest decrease, reporting 0.66%, down 10 basis points from October. New York saw its default rate decrease by two basis points to 0.91%, while Chicago reported a decrease to 0.96%, down one basis point from the previous month. Los Angeles saw its default rate increase, up eight basis points to 0.70%. Miami’s default rate spiked to 1.44%, up 38 basis points in November and setting a 12-month high, unmatched since 2013.

“One factor may be that home prices rising in Miami and mortgages are the largest portion of the city composite rate,” said David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “While Dallas home prices are rising faster than Miami, Dallas prices fell far less in the housing bust and have rebounded to new all-time highs. Miami home prices remain more than 20% below the highs set in 2006.”

Blitzer said recent data paint a picture of a strong economy, reflected by lower consumer credit defaults. “Default rates are modestly lower than a year ago, even as continued strength in home sales, auto sales and retail sales are supporting expanded use of consumer credit,” he said. “Money market rates rose after Election Day, the Fed raised the target range for the Fed funds rate last week, and has indicated that further increases lie ahead. The favorable default trends are likely to be tested in 2017 as interest rates rise.”