The national default rate declined again from the previous month, according to data through May 2014 released by the S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices. The indices offer a comprehensive measure of changes in consumer credit defaults.
The indices found that the national composite default rate was 1.04 percent in May, the lowest the rate has been since May 2006. Rates are down monthly from April's reading of 1.11 percent, and are down yearly as well from the May 2013 reading of 1.42 percent.
Rates for first mortgages declined again, down from April's posted percentage of 1.01 percent to May's rate of 0.92 percent. First mortgage default rates are down year-over-year as well—the default rate in May 2013 was 1.31 percent.
Second mortgage rates also fell again on a monthly and yearly rate. May's rate of 0.57 was below the April rate of 0.63 percent, and down from the May 2013 rate of 0.60 percent.
"Consumer credit default rates decreased for their seventh consecutive month," said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "The national composite is now only one basis point above its historic low. Mortgage default rates saw the biggest decline when compared to auto and bank card rates."
Blitzer continued, "Although historically low default rates are welcome, some home buyers may have difficulty qualifying for mortgages. Last year saw a surge in home prices but we are seeing signs of slowing gains this year. One question is whether banks are willing to make mortgage loans as home prices rise faster than incomes."
Blitzer noted that New York was the only metropolitan statistical area (MSA) with an increase in its overall default rate. However, New York's default rate experienced the largest drop-off from one year ago. He commented that all five cities—Chicago, Dallas, Los Angeles, Miami, and New York—remain below default rates seen last year.