NEW YORK—Consumer credit defaults continued their downward trend, according to the latest data from Experian.
The composite index for the S&P/Experian Consumer Credit Default Indices posted its second consecutive historical low of 0.88% in May, a decrease of nine basis points, Experian reported. The first mortgage default rate reported a historical low, down nine basis points to 0.74%. The second mortgage default rate also posted a second consecutive historical low of 0.42%, down one basis point from the previous month.
The auto loan default rate reported a historical low of 0.86%, a decrease of eight basis points. The bank card default rate reported its first decrease since January 2015 with a rate of 2.98%, a decrease of 20 basis points—its largest reported decrease since October 2013.
Four of the five major cities also continued their downward trend, reporting negative month-over-month default rate results in May, Experian said. Dallas led the way, reporting a historical low of 0.70%, down 20 basis points from the previous month. New York posted its second consecutive decrease, reporting a historical low of 0.95%, a decrease of 15 basis points. Miami also reported its second consecutive decrease, down three basis points to a reported rate of 1.17%. Chicago reported its third consecutive decrease, posting a default rate of 1.00%, down five basis points from the previous month. Los Angeles reported the only rate increase, an increase of five basis points to 0.95%, its third consecutive monthly increase.
“Consumer credit default rates are below pre-crisis levels, at new lows and continue to drift down,” says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “These low levels should not come as a surprise: interest rates haven’t turned up, consumer debt service as a proportion of household income is close to its record low, and the Federal Reserve reported that consumer wealth was at a peak in the first quarter of 2015. Nor should one assume that debt levels and defaults are low because no one is spending; on the contrary, May light vehicle sales were the highest since July 2005 and retail sales jumped. The economy looks good, consumers are spending and credit usage is rising. The combination of low debt service and economic expansion should ease worries about the fallout some fear when the Federal Reserve boosts interest rates.”