Default Rates Decline in April to Lowest Post-Recession Rate

Author: Colin Robins May 20, 2014

Share on facebookShare on twitterShare on google_plusone_shareShare on linkedinMore Sharing Services38

Data through April 2014 showed a decline in the national default rate from March, according to S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices. The indices are a comprehensive measure of changes in consumer credit defaults, released monthly.

The national composite default rate recorded its lowest post-recession figure of 1.11 percent in April. The month's number was the lowest default rate since June 2006. Default rates for first mortgages continued their downward slide, settling at 1.01 percent in April.

The first mortgage default rate in April was the seventh consecutive month of decline, and was the lowest level seen since July 2006. However, the second mortgage default rate saw an increase, which posted at 0.63 percent for April 2014.

"The prospect for further gains in economic activity and consumer confidence is good as shown by the continuing decline in consumer credit default rates," says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "Consumer default rates have stabilized at levels similar to those seen before the financial crisis."

Blitzer continued, "The national composite is nearing a historic low while the auto loan reached a historic low in April. Neither the one-month uptick in consumer price inflation nor the Federal Reserve's winding down of its bond buying threaten either consumer default rates or overall economic activity."

All five cities (New York, Chicago, Dallas, Los Angeles, Miami) measured by the S&P/Experian saw default rate decreases for the second consecutive month. New York experienced the largest month-over-month downturn, dropping 18 basis points below March’s default rate.

All five cities posted default rates below the previous year's rate.