On January 17, S&P Indices and Experian released December 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 and second mortgage and auto default rates. Bank loans were the only loan type that saw a drop in its default rate.
As seen in the graph below, the weight of first mortgage default rates tends to drive the trend in the national. First mortgage default rates rose for the fourth consecutive month, leading the same pattern for the composite.
In December, first mortgage default rates rose to 2.19%, from 2.17% in November. This is the fourth consecutive time we have seen an increase in first mortgage default rates. Prior to that, first mortgage default rates last rose in November 2010. Since August, first mortgage default rates have risen from 1.92% to 2.19%. The composite also rose those months, from 2.04% to 2.24%. Second mortgage default rates rose to 1.33% in December from 1.26% in November. Recent weaknesses we have seen in other housing statistics, including home prices, are evident in these data. Prior to the most recent months, mortgage default rates had seen two years of declining trends. The key concern is how long this recent trend reversal will continue.