Experian: Default rates climb, ‘should be watched’

December 18, 2015

NEW YORK (12/18/15)--The national default rate stepped higher in November, according to Experian’s gauge of consumer credit defaults, which rose 3 basis points to 0.97% during the month.

The increase was also broad based by loan type.

Defaults for auto loans rose 4 basis points to 1.04% in November. For first mortgages, defaults increased 1 basis point to 0.82%. And for credit card loans, the default rate jumped 16 basis points to 2.91%, Experian said.

“November was the second consecutive month when default rates rose across all types of consumer credit,” said David M. Blitzer, managing director/chair of the index committee for the S&P Dow Jones Indices. “While two months isn’t long enough to establish a turning point or a new trend, the consumers’ financial condition should be watched going forward.”

Three of the five major cities tracked by the index witnessed rising default rates in November.

Miami recorded a jump of 19 basis points to 1.48% overall, Dallas defaults climbed 13 basis points to 0.88%, and Los Angeles defaults rose 2 basis points to 0.74%.

“Consumer spending has been a key source of growth for the economy,” Blitzer added. “However, other factors do not suggest any cause for concern over consumer credit defaults: inflation remains low and expectations of future inflation are low and stable, the labor market continues to improve, and wages--long dormant--may be turning upward.”

Blitzer also said that the Fed’s decision to raise interest rates this week likely will not influence the direction of auto loan rates.

“Auto loan rates are more likely to be influenced by auto sales and credit card fees seldom respond to short-term developments,” he said. “It will take much more than one Fed move to affect consumer borrowing costs.”