A new statistical report from credit reporting agency Experian and S&P Dow Jones Indices shows that the mortgage default rate for first mortgages had finally declined in February 2015, marking the first time in seven months that this has happened.
According to the S&P/Experian Consumer Credit Default Indices for February, the first mortgage default rate was down two basis points to an even 1.00 percent, from the previous month’s 1.02 percent. This is a much lower figure than the February 2014 figure of 1.23 percent. The second mortgage default rate, however, was up from 0.64 percent to 0.66 percent month-over-month; this two-basis-point gap is the same as the year-over-year difference in default rates.
Overall, the national composite delinquency rate was the same as it was in January, holding firm at 1.12 percent. This is still lower than February 2014’s composite delinquency rate of 1.30 percent.
“The combination of a strong February employment report and continued low oil prices all point to a buoyant economy with optimistic consumers,” read a succinct explanation from S&P Dow Jones Indices index committee chairman and managing director David Blitzer. But despite overall delinquency remaining flat and first mortgage delinquency rates, in particular, improving, bank card and auto loan delinquency was up in the new report. Bank card delinquency jumped up 23 basis points month-over-month from 2.61 percent to 2.84 percent, while auto loan delinquency ticked up three basis points from 1.03 percent to 1.06 percent.
Certain economic reports as of late have been very upbeat, with the national unemployment rate dropping to a seven-year low of 5.5 percent. However, experts have pointed out how this statistic may be slightly deceiving, as the number of people dropping out of the workforce had increased by 354,000 in February to an all-time high of 92,898,000. Like many a number-cruncher, Blitzer also expects that the U.S. Federal Reserve may raise short-term rates in the second half of 2015, due to the largely positive tenor of U.S. economic reports.
“A true test of consumer credit quality and the prospects for future default rates will come in the second half of 2015 by which time the Fed will most likely have begun to raise interest rates,” said Blitzer, talking about the ramifications of a rate hike. “Given current low levels of default rates and low debt service burdens, there are no concerns of a consumer credit crisis any time soon.”