The default rate on first mortgages dropped to a four-month low in April, falling to just 0.69% of loans, which is down from 0.75% in March, according to the S&P/Experian Consumer Credit Default Indices.
The default rate on second mortgages was even lower at 0.51%, down from 0.57% in March, according to the report.
The report also measures the default rate on credit cards and auto loans. In April, the default rate for credit cards was 3.35%, up from 3.31% in March. The default rate for auto loans was 0.90%, down from 1.00%.
“Default rates on bank cards continue to creep higher, while default rates on auto loans are little changed,” says David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “The Federal Reserve’s quarterly survey of senior bank loan officers revealed that a modest fraction of banks tightened standards on credit card loans and a similar portion of banks were tightening standards for auto loans. Banks also raised the spread over their cost of funds and increased the minimum credit scores required for auto loans. The same Fed survey showed weakening demand for auto loans. Separately, auto sales declined during the first quarter before seeing a slight rise in April. Demand for bank card loans was mixed, according to the Fed survey.
“Default rates on first mortgages are steady as home prices continue to rise in most parts of the country and sales of both new and existing homes increase,” Blitzer adds. “The Fed survey reported little change in either demand for mortgage loans or mortgage lending standards. The level of outstanding mortgage debt bottomed in the second quarter of 2014 and has been increasing steadily since then. After almost three years, outstanding mortgage debt is nine percent below the peak seen in the first quarter of 2008. Some analysts question if continuing increases in home prices presage a new housing bubble. Given conditions in the mortgage markets, this is not a current concern.”