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First Mortgage Default Rates Hold Steady

Default-Notice-BH-300x199Although they did see a small uptick as last year ended, first mortgage default rates remained flat year-over-year, according to the S&P/Experian Consumer Credit Default Indices covering data up through January.

According to the S&P/Experian Consumer Credit Default Indices released on Tuesday, the default rate for first mortgages inched higher between December 2017 and January 2018, increasing from 0.68 percent to 0.72 percent. This put it exactly where it had been a year previously in January 2017.

The Consumer Credit Default Indices track “the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien, and second mortgage lien.” In addition to the individual categories, the Indices also calculate a composite score that takes into account all four elements. In January 2018, the composite index increased from 0.91 percent (in December 2017) to 0.95 percent, up 0.03 percent year-over-year.

“The economy is growing, consumers are bullish and they're spending money," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "We are seeing the usual result of spending growth: modest increases in consumer credit defaults—especially in bank cards—and overall increases in the level of debt in the economy. Neither the defaults nor the amount of debt outstanding are immediate problems. The Federal Reserve is expected to continue raising interest rates. Home mortgage rates, which respond to movements in the financial markets, have risen from 4% to about 4.4% since the beginning of 2018. Although interest rates have increased, there are few signs of financial tightness or increased difficulties in qualifying for loans.”

The Consumer Credit Default Indices also track the composite score across five major metropolitan statistical areas (MSAs): New York, Chicago, Dallas, Los Angeles, and Miami. Three of the five cities saw a small year-over-year increase in their composite numbers, with New York climbing from 0.88 percent in January 2017 to 0.95 percent in January 2018. Chicago inched from 1.03 percent to 1.23 percent, and Dallas from 0.75 percent to 0.87 percent. Both Los Angeles and Miami decreased year-over-year—L.A. sliding from 0.80 percent to 0.77 percent and Miami dropping from 1.67 percent to 1.27 percent.

Month-over-month, however, all five MSAs either saw increases or held steady, with Miami seeing the largest spike as its composite index level climbed from 0.98 percent to 1.27 percent.

About Author: David Wharton

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