Default rates for most types of consumer loans continued to ease during July according to the S&P/Experian Consumer Credit Default Indices released on Tuesday. Only second mortgages increased from June levels and those were up only marginally from .73 percent to .75 percent. First mortgage defaults were unchanged from June at 1.41 percent which is their recent low.
The Composite Index, which measures consumer defaults in four categories, was down one basis point to 1.51 percent. In July 2011 the Composite stood at 2.06 percent. While unchanged month-over-month, the first mortgage default rate is down significantly from 1.93 percent last year and the slight uptick in second mortgage defaults still left the July 2012 rate 50 basis points lower than the 1.25 percent posted in July 2011.
The largest reduction was in bank card defaults which fell from 3.97 percent in June to 3.83 percent in July. The rate one year earlier was 5.64 percent. Auto loans delinquencies also decreased, from 1.27 percent in July 2011 to 1.04 in June 2012 to 1.01 in July 2012.
"While continuing to show decreasing default rates, most of the changes in July were small compared to the magnitude of decline we had seen in the first six months of the year," David Blitzer, Managing Director and Chairman of S&P Down Jones Indices Index Committee. "Consumer default rates showed small movement from June to July, in most cases the trend continued down or flat, as the consumer's financial condition continues to improve."
Blitzer said that looking at the rate of new defaults in mortgages or auto loans, it appears that consumers credit positions have recovered from the financial crisis. "However, other data show that previously defaulted mortgages remain an issue and many consumers still face an overhang from old debts. Bank card trends are also favorable although the experience of the last eight years is more variable."
The S&P/Experian Index focuses on five geographically dispersed cities, New York, Chicago, Dallas, Los Angeles, and Miami. The year-over-year rate was down significantly in all five metropolitan areas but rose in two from June to July and was unchanged in a third.