Slight Increases in Mortgage Credit Defaults

Consumer credit defaults on first and second mortgages were up in October, according to the latest data from the S&P/Experian Consumer Credit Default Indices.

The first mortgage default rate increased from 0.67 percent in September to 0.70 percent in October, while the second mortgage default rate upticked from 0.56 percent in September to 0.58 percent last month. The composite default rate and the auto loan default rate saw three basis points increases, while the bank card default rate remained unchanged from last month at 2.76 percent.

“Consumer credit and mortgage debt outstanding are rising and economic growth picked up in the third quarter,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “These positive signs are accompanying small increases in the consumer credit default rates. While the rise in defaults is minor, it is seen in all but one credit category: the auto default rate was unchanged while mortgages and bank cards saw increases. Among the five cities tracked in this report, four experienced higher default rates. With recent reports showing improved consumer sentiment and the holiday spending season fast approaching, default rates may bear scrutiny.”

Blitzer added that the prospect of rising interest rates “may put upward pressure on consumer credit interest rates and lending terms.”