Consumer Defaults on the Decline in July

By Stevie Duffin Updated on 12/14/2012

By Daniel Duffield

According to the S&P/Experian Consumer Credit Default Indices which were released on Tuesday, the level of defaults for the majority of consumer loans has continued to lessen in July. Only second mortgages rose from .73 in June to .75 percent in July. Statistics showed that first mortgage defaults remained unmoved at 1.41 percent, a recent low.

Consumer default measurements were down one basis point at 1.51 percent, according to the Composite Index that measures four different categories of consumer defaults. In July 2011, the Composite measured 2.06 percent. Although unchanged month to month, the first mortgage default level has decreased substantially from 1.93 percent last year, while the slight rise in second mortgage defaults left ratings from July 2012 at 50 basis points less than the July 2011 posting of 1.25 percent.

The most significant decrease was in bank card defaults, falling from 3.87 percent in June to 3.83 percent in July. One year prior, the rate was 5.64 percent. Delinquencies on auto loans also declined, lowering from 1.27 percent in July 2011 to 1.04 in June 2012 to 1.01 in July 2012.

David Blitzer, Managing Director and Chairman of S&P Down Jones Indices Index Committee related that although the default rates continue to decrease, shifts in levels for July were comparatively tiny compared to the considerable drop during the first half of the year. He went on to say that consumer default rates did not move much from June to July, though the consumer’s financial condition continually recovers.

Blitzer, on the rate of new defaults in mortgages and auto loans, stated that consumer credit standing has recovered from the financial crunch, though other statistics have revealed that previously defaulted mortgages continue to be a problem, with many consumers still dealing with old debt. According to Blitzer, bank card trends have also been satisfactory though the past eight years have been unpredictable.

The S&P/Experian Index centers on five geographically scattered cities, Chicago, Dallas, Los Angeles, New York, and Miami. The year to year rate was appreciably low in all five cities but increased in two from June to July, remaining unaffected in a third.