New report shows slight rise in first and second mortgage default rates

by Michael Mata21 Sep 2016
According to the latest report by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, there was a slight rise in the first and second mortgage default rates in August 2016.  

The first mortgage default rate was 0.68% in August (a slight increase from 0.66% in July), and the second mortgage default rate was 0.52% in August (a moderate increase from 0.44% in July).

"Despite small monthly movements in consumer credit defaults, the overall default rates are stable and close to the lowest levels since shortly before the financial crisis," said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "Bank card default rates are more volatile and slightly higher than those tracking mortgages or auto loans. Compared to a year earlier…mortgage loan defaults are 16 basis points lower. The overall consumer credit picture gives little reason to be concerned about default rates.”  

Related data published by the Federal Reserve indicate that growth in consumer and household debt is currently about 4.4% annually, increasing about two percentage points faster than nominal GDP growth. Mortgage debt peaked in the first quarter of 2008 and reached its most recent low point in the first quarter of 2015.

“Barring a repeat of the recent and severe recession, both consumer credit and mortgage debt outstanding are expected to continue growing at, or faster than, the pace of nominal GDP growth," said Blitzer.

In July’s default report, Blitzer noted that the US economy faces far more uncertainties than usual because of the upcoming elections. “With the electoral outcome unknown and large differences between the candidates’ policy proposals, one should expect these uncertainties to cause some delays in business investments or consumer spending on big ticket items,” he said.

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