Consumer Credit Defaults at Lowest Rate of Year

The economy’s getting better, as President Trump keeps reminding us.  And that means fewer consumers are defaulting on their financial obligations.

The S&P/Experian Consumer Credit Default Indices composite rate was five basis points lower than last month, at 0.82%. The bank card default rate dropped 38 basis points to 3.14%. The auto loan default rate decreased eight basis points to 0.89%. The first mortgage default rate was down two basis points, to 0.63%.

All five major MSAs recorded decreases in composite default rates in September 2018. Dallas showed the largest decrease, falling 11 basis points to 0.73%. The default rate for Los Angeles fell nine basis points to 0.56%, while the rate for Chicago fell six basis points to 0.85%. The default rate for New York dropped four basis points to 0.79%, while the default rate for Miami was one basis point lower, at 1.56%.

Notably, all loan types and all major MSAs saw a decrease in default rates in September 2018. September 2018 also marked the fifth consecutive month of decreasing bank card default rates. The latest rate of 3.14% is the lowest level observed since December 2016. The monthly drop of 38 basis points was the biggest monthly decline seen since December 2015.

“Consumer credit default rates for mortgages and auto loans are stable, while default rates for bank cards declined modestly in the last few months,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “With the low unemployment rate and some improvement on wage gains, consumers are not facing rising economic pressure. The favorable income situation combined with auto and home sales that have drifted down since late 2017 led to the current good consumer credit default pattern. Soft retail sales growth contributed to improvements in the bank card default picture.

SOURCE:  S&P Dow Jones Indices, David Blitzer, Managing Director and Chairman of Index Committee, 212 438 3907, david.blitzer@spglobal.com

 

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