According to the March 2017 Consumer Credit Default Indices released by S&P Dow Jones Indices [1] and Experian [2], mortgage default rates are up one basis point from February to .75 percent, a one-year high.
Additionally, the bank card default is up nine basis points to 3.31 percent, and the auto loan default rate is one percent, a five-basis point decrease. The 3.31 percent national bank card default rate is a 45-month high.
Year-over-year, the mortgage default rate dropped from .77 percent, while the bank card default rate increased year over year.
"The continuing low consumer credit default rate reflects recent strong job growth and a favorable economy," says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. "The economy is also supporting consumers' positive outlook and strong sentiment about the economy and their financial condition. Data from the Federal Reserve shows that consumer credit continues to expand at more than 6% per year, the highest pace since 2007-2008. Other Federal Reserve data indicate that household net worth in 2015 and 2016 rose 2.3% each year.
"Currently the debt service ratio for consumer credit – the percentage of disposable income required to service consumer credit debt – is 5.58%, up from its recent low of 4.92% in 2012 but lower than the 6.01% peak seen shortly before the financial crisis. The higher interest rates that most analysts expect over 2017-2018 are likely to combine with continued growth in consumer credit to push the debt service ratio back towards the 6% level."
Of the five major cities covered by the S&P/Experian Consumer Credit Default Indices (New York, Chicago, Dallas, Los Angeles, and Miami), New York and Chicago posted month-over-month increases in the Index level, while Dallas, Los Angeles, and Miami posted month-over-month decreases in defaults. All five areas except Los Angeles posted year-over-year increases.
For more information on the S&P Dow Jones Indices, visit spdji.com [3].