Consumer credit default rates remained stable during the month of July, according to credit bureau Experian, which expected them to continue to remain level — even with an interest rate hike.
The mortgage default rate remained unchanged, at 0.8%, from the month before. Second-mortgage default rates also fell 0.55%. The rate of auto loan defaults increased slightly, one basis point, to 0.86%, while bank and card default rates also fell, nine basis points, to 2.79%.
"The stable consumer credit default rates confirm the recent economic improvements seen in the unemployment rate and GDP growth," said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a release. "Recent increases in outstanding consumer credit combined with stable default rates and strong consumer sentiment point to stable individual financial conditions."
Blitzer then threw some cold water on this optimistic assessment of current economic conditions.
"However, wage increases are running at about 2% annually — or under 1% after inflation — which means that there is little margin for error should the economy stumble," he said.
"At the same time, concerns over the impact of an expected Federal Reserve rate increase are exaggerated. Interest rates on consumer loans are unlikely to be affected and no immediate economic fallout is anticipated."
