While overall national consumer credit default has hit its lowest levels in 10 years, the first mortgage default rate continues to decline, according to the July 2014 S&P/Experian Consumer Credit Default Indices released on August 19.
The first mortgage default rate slipped to 0.88 percent in July, down from .089 percent the previous month. It was the ninth straight month in which the first mortgage default rate experienced a drop, the report said. That rate has not experienced a month-over-month increase since October to November in 2013, which it crept up from 1.28 to 1.30 percent.
The percentage of first rate mortgage defaults experienced a year-over-year decrease from 1.25 to 0.88 in July, a change of .37 percent.
"Mortgage default rates have been trending down while Auto and Bank Card are a bit higher than their historical lows set in April and March," said David M. Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices. "Driven by mortgages, household debt decreased in the second quarter of 2014. Non-housing debt rose slightly in the second quarter. In the latest Federal Reserve survey of lending standards, a small portion of banks reported some easing of standards while most banks reported no change."
Second mortgage defaults also declined month-over-month and year-over-year, according to the index. July's second mortgage default rate of .52 percent represents a drop from .57 percent in June and .54 percent from July 2013. In November 2013, the percentage of second mortgage defaults reached .78 percent, its highest rate in the last 12 months.
The July rate for first and second mortgage defaults were both lower than the composite consumer credit default rate for July of 1.01 percent. The composite default rate inched downward from 1.02 percent in June and is down from 1.34 a year ago, according to the index.
“Los Angeles dropped to its lowest default rate of 0.66 percent. Dallas saw its default rate decline by seven basis points and is only a few basis points away from its historical low set in May 2014," Blitzer said. "Chicago and Miami are at their lowest default rates since 2006. Miami continues to maintain the highest default rate of 1.51 percent while Los Angeles posted the lowest default rate of 0.66 percent. All five cities – Chicago, Dallas, Los Angeles, Miami and New York – remain below default rates seen a year ago.”