First Mortgage Default Rate Down
The first mortgage default rate declined by two basis points from 0.68 percent in April to 0.66 percent in May, according to the latest data from S&P/Experian Consumer Credit Default Indices.
The composite rate for consumer loan defaults decreased three basis points to 0.89 percent. The bank card default rate dipped two basis points to 3.84 percent and the auto loan default rate slid by six basis points from last month to 0.93 percent.
"Consumers continue to pay their bills on time," said David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "With the economy turning in good numbers with low unemployment, low inflation and gradually rising wages, consumer credit default rates are flat to down. Consumer borrowing has recovered from the financial crisis. Mortgage debt outstanding fell 12.6 percent from its early 2008 peak to the bottom in 2014; now it remains roughly 6.1 percent below the peak.”
Blitzer added that “there may be some concern about how long the moderate default rates can continue. Savings as a percentage of disposable income is declining. At the current level of 3 percent, it is near the low point seen in the boom before the financial crisis. While inflation remains low, wage growth is not very high and home prices are rising two to three times faster. Any rapid rise in defaults will wait for the next recession, whenever it comes.”