Mortgage default risk remains low but is inching up

Register now

Although mortgage default risk remains very low, it was the only category of consumer lending to experience increases both sequentially and year-to-year in VantageScore Solutions' latest update to its index.

The weighted-average probability of default for mortgages in the fourth quarter of 2017 was just over 1%, but it was 13% higher than a year ago and almost 4% higher than the previous quarter, according to VantageScore, a provider of credit scoring models the mortgage industry is considering broader use of.

Of the four consumer lending categories tracked by VantageScore, only student loans experienced a greater consecutive-quarter increase of more than 21%. Student loans had the highest probability of default at more than 18% in 4Q17, even with their default risk down nearly 3% from a year ago.

Auto loans had the next highest probability of default approaching 4%, but the default risk was down more than 2% from the previous quarter and almost 5% from a year ago.

Bank cards had a probability of default approaching 3% and experienced almost a 2% drop in default risk compared to the previous quarter. Bank cards registered a 1% decline in default risk compared to a year ago.

Originations in all four categories were down compared to the previous quarter with mortgages, auto loans and bank cards all down by between 5% and 6% as student loan volumes fell by more than 50%.

Mortgages and student loans were the only two categories to also register year-to-year declines in originations for the quarter, of more than 17% and 3%, respectively. Bank cards managed to maintain the same volume year-to-year and auto loans managed to eke out a slight increase just over 1%.

For reprint and licensing requests for this article, click here.
Mortgage defaults Consumer lending Underwriting Student loan debt VantageScore Solutions