Composite Credit Default Rates Rise for 3rd Straight Month
Composite default rates rose for the third consecutive month in September, as the first mortgage default rate rose slightly, reported S&P Dow Jones Indices and Experian, New York.
The companies’ Consumer Credit Default Indices reported the composite rate increased by two basis points from August to 0.88%. The bank card default rate continued to fall, down four basis points to 3.15%. Auto loan defaults increased 10 basis points to 1.05%. The first mortgage default rate increased one basis point from August to 0.66%.
Four of the five major cities saw their default rates increase in September. Chicago and Miami saw the largest increases, each up six basis points to 1.00% and 1.19%, respectively. New York came in at 0.97%, an increase of two basis points from August. Dallas reported an increase of four basis points to 0.78%. Los Angeles was the only major city reporting a decrease, with a one basis point drop to 0.65%.
“While the composite consumer credit default rate eased higher in the last three months, it is even with the level of one year ago,” says David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “Moves among mortgages, bank cards and autos have tended to offset one another over the past year. As a result, no sector is currently showing substantial increases or signs that consumers are facing renewed financial stress. Other economic indicators through the summer echo consumers’ favorable condition: debt service as a proportion of income is modest while consumer credit and mortgage borrowing continues to see moderate expansion.”
Blitzer noted estimates of hurricane damages suggest a total cost of $70 billion including the loss of possibly one million automobiles. Damage estimates for the fires are still being determined. “Even after insurance coverage and government aid programs, many consumers will face very large unexpected expenses stressing their personal financial situations,” he said. “Increased consumer credit default rates over the next several months are likely.”
