New January Data Indicates Default Rate Remained Steady

The nation's first mortgage default index stayed flat in January while the national composite credit default index rose slightly for the sixth straight month, according to the S&P Dow Jones Indices and S&P/Experian Consumer Credit Default Indices for January 2015 released Tuesday.

According to the data, the first mortgage default index remained at 1.02 percent from December to January after experiencing its largest increase in 15 months (five basis points) from November to December. January's first mortgage default level is still 14 basis points above its lowest level of 0.88 percent, which was reached in July 2014. January 2015's reported level of 1.02 percent is 24 basis points lower than the level reported for January 2014 (1.26 percent).

Second mortgage defaults, meanwhile, experienced a month-over-month increase of five basis points up to 0.64 percent following a spike of 11 basis points from November to December. Year-over-year in January, the second mortgage default rate declined by eight basis points (from 0.72 percent down to 0.64 percent).

The national composite default index, which includes first and second mortgage defaults as well as those on bank cards and auto loans, rose slightly month-over-month by one basis point up to 1.12 percent in January. That index was down year-over-year in January, too, by 22 basis points (from 1.34 percent reported in January 2014).

"The recent improvements in the economy have boosted consumer spending and confidence without any significant increase in consumer credit defaults," said David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "This favorable pattern of stronger spending and stable default rates could be threatened by higher interest rates or a rebound in oil and gas prices. However, for the moment the economy is justifying consumers’ upbeat outlook."

All five major metropolitan areas measured in the indices – Chicago, Dallas, Los Angeles, Miami, and New York – reported year-over-year default rate declines in January. Miami had the highest default rate in January (1.35 percent) while Los Angeles had the lowest (0.84 percent). New York experienced the largest month-over-month increase in January for the second straight month, this time at five basis points (from 1.05 percent to 1.10 percent) while Los Angeles had the largest decline from December to January (two basis points, from 0.86 percent down to 0.84 percent). The default index in Dallas rose month-over-month for the fourth consecutive month, this time by two basis points from 1.08 percent to 1.10 percent. In Chicago there was a slight decline of one basis point from December to January (1.16 percent down to 1.15 percent) while in Miami there was a slight increase (1.34 percent up to 1.35 percent).