The national credit picture took a nine basis point dip in July from the year prior, as mortgage and consumer credit default rates overall stay steady on a month-over-month basis, according to the latest S&P Dow Jones/Experian Consumer Credit Default Indices.
The indices reported that, nationally, first mortgage defaults rose one basis point to 0.66 percent in July from June 2016 but this was a dip from the reported 0.80 percent from the year prior. Second mortgage defaults on the other hand fell four basis points from June to July and 11 basis points from the year prior.
“Consumer credit default rates remain close to 12 year lows amidst moderate growth in spending and incomes,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The consumer economy is growing with few significant difficulties in accessing credit. Personal incomes rose 2.7% in the last year and retail sales, excluding autos, were up 2.3% in the year to July. Employment is increasing, median wage growth, as reported by the Atlanta Federal Reserve Bank, is 3.6% at annual rates, and consumer sentiment continues at high levels. Consumers’ use of debt has expanded with both consumer credit and mortgage debt balances rising.”
Additionally, New York reported a default rate of 0.77 percent for July 2016, down 6 basis points from 0.83 in June and 15 basis points from the year prior. Dallas also reported a decreased default rate of 0.69 percent for July, down 5 basis points from June, but up 5 basis points from July 2015. For Chicago’s default rate, there was a reported decreased of 12 basis points from the prior month as well as a 26 basis point decrease from July of the previous year. Los Angeles reported a default rate of 0.63 percent, down four basis points from June 2016 and 26 points from the year prior like Chicago. Miami came in at 1.37 percent. That’s a six-point increase, and it marks the fifth consecutive month Miami’s default rate grew. However, Miami fell eight basis points from the year prior.
“This being an election year, and one when there will definitely be a new president next January, the economy faces more than the usual uncertainties,” says Blitzer. “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. Delays in spending are likely to limit the growth in consumer and corporate debt, avoiding substantial increases in default rates in the near term.”
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