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Credit Default Rates Inch Up in August

loan-defaultCredit default rates in the United States rose slightly in August, pushed in part by an uptick in mortgage defaults.

The national credit default rate, which includes bank cards, auto loans, and both first and second mortgages, edged up to 1.03 percent in August from July's historical low of 1.01 percent, according to data compiled by S&P Dow Jones Indices and Experian.

The monthly increase was fueled by a rise in first mortgage default rates, which were up to 0.91 percent from 0.88 percent the month prior, ending a nine-month declining streak. Defaults among auto loans also moved up, climbing to 1.00 percent from 0.96 percent.

David M. Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices, said the increases reflect brisker business in both the auto and housing industries.

"With the recent and continued growth in the economy, sales of automobiles and existing homes have gained since the start of the year," Blitzer said. "These factors may be leading to more borrowing and modest increases in default rates.

"No return to the extreme default experience of a few years ago is imminent," he added.

Default rates improved in the other two categories, with the bank card index declining 13 basis points to 2.73 percent and the second mortgage index slipping 1 basis point to 0.51 percent.

The S&P/Experian report also included default percentages for five of the nation's top metros: New York, Chicago, Dallas, Los Angeles, and Miami.

According to the report, defaults were down in both Miami and New York, dropping to 1.45 percent and 1.07 percent, respectively. New York's new index level was its lowest on record, while Miami's was the lowest in eight years.

Meanwhile, Los Angeles was the only market to post an increase, rising to a default rate of 0.72 percent from 0.66 percent in June.

Compared to a year ago, default rates in all five cities looked healthier in August.

About Author: Tory Barringer

Tory Barringer began his journalism career in early 2011, working as a writer for the University of Texas at Arlington's student newspaper before joining the DS News team in 2012. In addition to contributing to DSNews.com, he is also the online editor for DS News' sister publication, MReport, which focuses on mortgage banking news.

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