On November 15, S&P Indices and Experian released October data for the S&P/Experian Consumer Credit Default Indices, which measure changes in consumer credit defaults. The data showed an increase in the composite index, led by an increase in first mortgage default rates. Auto loan, second mortgages and especially bank cards all saw pretty significant drops in their default rates; however, the national composite rose with first mortgages.
As seen in the graph below, the national composite closely follows first mortgages primarily dues to how much weight first mortgage default rates have in the national composite, about 84%. The purchase of a house is a very large and leveraged investment, so first mortgage loans are substantially larger than any other consumer loan type. As a result, a first mortgage default has a larger impact on a consumer’s financial health than the other loan types.
First mortgage default rates rose from 1.99% in September to 2.08% in October. This is the second time we have seen an increase in first mortgage default rates since November 2010. Second mortgage default rates fell moderately to 1.29% in October, from 1.32% in September.