The national default rate on first mortgages was about 0.66% in July – up one basis point compared with 0.65% in June but down 14 basis points compared with 0.80% in July 2015, according to the S&P/Experian Consumer Credit Default Indices.
The national default rate on second mortgages was about 0.44%, down four basis points from 0.48% in June and down 11 basis points from 0.55% in July 2015.
Meanwhile, the national default rate for credit cards was 2.92%, down from 3.11% in June but up from 2.79% in July 2015.
The national default rate for auto loans was 0.93%, up from 0.91% in June and up from 0.86% in July 2015.
The composite default rate (first mortgages, second mortgages, credit cards and auto loans combined) was 0.83% in July – up from 0.82% in June but down from 0.92% in July 2015.
“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 percent in the last year, and retail sales, excluding autos, were up 2.3 percent in the year to July. Employment is increasing; median wage growth, as reported by the Atlanta Federal Reserve Bank, is 3.6 percent 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.
“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,” Blitzer adds. “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.”