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The national composite default index dropped by seven basis points from February to March, its first month-over-month decline in eight months, led by declines in both mortgage default indices, according to S&P Dow Jones Indices and S&P/Experian Consumer Credit Default Indices for March 2015 released Tuesday.
The composite index, which includes first and second mortgage defaults as well as those on bank cards and auto loans, fell from 1.12 percent in February down to 1.05 percent in March. The first mortgage default rate declined for the second straight month, falling eight basis points down to 0.92 percent, and is nearing its record low of 0.88 percent set in July 2014. The second mortgage default rate declined by 16 basis points, down to 0.50 percent.
The decline in mortgage default rates helped bring the composite index down for March, offsetting the recent large increases in the bank card default rate (15 basis points in March and 23 basis points in February) up to 2.99 percent. The auto loan index fell by three basis points to 1.03 percent.
“The increase in the bank card default rate over the last two months is the largest such jump in five years,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “While bank card defaults spiked, default rates for first mortgages and autos were down in March and have shown no large increase since 2012."
There were mixed results among the five major cities in the index. Two cities reported declines month-over-month – Chicago (default rate of 1.15 percent, a decrease of three basis points) and Dallas (rate of 1.05 percent, a decrease of 12 basis points, first decline since September 2014). Cities posting increases were Miami (1.39 percent, increase of 22 basis points), New York (1.20 percent, increase of six basis points, fourth consecutive month with an increase), and Los Angeles (0.89 percent, increase of six basis points).
“Looking at the five cities tracked for the release, the only large move was an increase in Miami which largely reversed the previous month’s decline, Blitzer said. "Across the country, the use of consumer and mortgage loan continued to expand. The mix of recent economic data suggests the economy is growing, but more slowly than at the end of 2014. Moreover, the signs of moderation – retail sales and March’s slower increase in payrolls – suggest that the Fed isn’t likely to raise interest rates until later in 2015 or 2016. This means that stable borrowing costs may lead to further expansion in consumer credit."
