Mortgages Push the 4Q National Credit Default Rate Up

First and second mortgage default rates were “the principal culprits” to an eight basis point monthly increase of the December 2012 National Consumer Credit Default Indices reported by S&P Dow Jones and Experian.

The first mortgage default rate increased to 1.68% in December, up from 1.58% in November, 1.47% in October and 1.36% in September, “its post-recession low” for 2012.

The second mortgage default rate also increased “from its historic low” of 0.62%, up to 0.69% in December.

Comparatively, auto loans and credit cards, the other two consumer credit default rate categories monitored by the S&P/Experian Consumer Credit Default indices, performed better during the month.

Despite the overall consumer credit quality improvements reported in 2012, according to managing director and chairman of the index committee for S&P Dow Jones Indices, David Blitzer, “fourth-quarter consumer default rates reversed some of the recent declines and pushed the composite default rate above its level of last May.”

Due to soaring mortgage default rates after hitting a post-recession low of 1.46% in September 2012, the national composite increased for three consecutive months, posting 1.55% in October, 1.64% in November and reaching 1.72% in December.

The deterioration that persisted during the last quarter of 2012, however, is not significant enough as all delinquency rates on all loan types “remain below their respective levels” in 2011.

Given that findings are based on Experian's consumer credit data on approximately $11 trillion in outstanding loans sourced from 11,500 lenders, annual improvements indicate some level of mortgage market recovery albeit at a slow pace.