Consumer Credit Defaults Continue Upward Trend
According to S&P and Experian, consumer credit defaults continue to rise, with the bank card default rate leading the way. The auto loan default rate also increased.
NEW YORK — Consumer credit defaults continued to show a slight upward trend according to data released by S&P Dow Jones Indices and Experian.
According to the S&P and Experian Consumer Credit Default Indices, which covers data through February 2015, the bank card default rate led the way, with an increase of 23 basis points to 2.84% — the highest reported rate since July 2014. This also marked the first year-over-year increase in the bank card default rate since July 2010.
The auto loan default rate reported an increase of three basis points to 1.06%. The second mortgage default rate increased by two basis points to 0.66%. The national composite rate remained flat, reporting a default rate of 1.12% in February. The first mortgage default rate decreased for the first time since July 2014, down two basis points to 1.00% from the previous month.
Five major cities reported mixed results in February with two cities showing lower default rates. Miami reported a default rate of 1.17%, a decrease of 18 basis points — its largest decrease since September 2014. Los Angeles reported a decrease for a second consecutive month at 0.83%, down one basis point. Dallas continued its positive trend for the fifth consecutive month with a 1.17% default rate, an increase of seven basis points. New York posted its third consecutive increase with a reported rate of 1.14%, up 16 basis points from its historic November 2014 low. Chicago also saw its default rate increase to 1.18%, an increase of three basis points from the previous month.
"The combination of a strong February employment report and continued low oil prices all point to a buoyant economy with optimistic consumers," says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "The recent, though modest, increases in default rates for bank cards and auto loans suggest that consumers are becoming more free-spending. Mortgage default rates, the largest component in the national index, held steady and prevented a rise in the national numbers.
“A true test of consumer credit quality and the prospects for future default rates will come in the second half of 2015 by which time the Fed will most likely have begun to raise interest rates,” he added. “Given current low levels of default rates and low debt service burdens, there are no concerns of a consumer credit crisis any time soon."
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