Credit Default Indices Rise for 2nd Straight Month

S&P Dow Jones Indices and Experian, New York, said major credit default indices rose for the second consecutive month in August, while three of the five major cities surveyed saw default rates rise.

The S&P/Experian Consumer Credit Default composite rate increased by three basis points in August to 0.86%. The first mortgage default rate increased three basis points from July to 0.65%. The bank card default rate continued to fall, down 12 basis points to 3.19%. Auto loan defaults increased by nine basis points to 0.95%. The composite, auto and first mortgage default rates are close to their levels from one year ago.

Three of the five major cities saw default rates increase in August. New York had the largest increase, up 13 basis points from July to 0.95%. Los Angeles reported 0.66% for August, up three basis points from the previous month. Chicago came in at 0.94%, up four basis points from July. Dallas reported a decrease of three basis points to 0.74%. Miami came in at 1.13% for August, down 10 basis points from July.

“Overall, consumer credit defaults show no reason for alarm,” said David Blitzer, Managing Director and Chairman of the Index Committee with S&P Dow Jones Indices. “The combination of an improving labor market, low inflation and low interest rates are the principal factors behind currently favorable consumer credit conditions.”

Blitzer noted, however, hurricane damage in Houston and across Florida is creating “substantial” financial stress. “The impact on mortgages on damaged or destroyed homes is not yet clear,” he said. “Job losses and rising spending needs could lead to increased consumer credit defaults in coming months.”