S&P/Experian: Auto Loan Defaults Stay Flat in December, Stopping 3-Month Rise

January 16, 2013

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NEW YORK — While the composite rate of the S&P/Experian Consumer Credit Default Indices ticked up for the third consecutive month, auto loan default rates stayed flat in December, halting a rising trend that lasted three months.

According to S&P Dow Jones Indices and Experian, the auto loan default rate remained at 1.09 percent, the same level as November.

Meanwhile, after hitting a post-recession low of 1.46 percent in September, the national composite rate — a comprehensive measure of changes in consumer credit defaults — increased for third month in a row. The December reading came in at 1.72 percent, following levels of 1.64 percent in November and 1.55 percent in October.

As the streak of climbing auto loan default rates stopped, analysts said the first mortgage default rate showed the same pattern as the composite measure.

First mortgage defaults increased from its post-recession low of 1.36 percent in September to 1.47 percent in October, 1.58 percent in November before reaching 1.68 percent in December.

The latest report also mentioned the second mortgage rate went up to 0.69 percent in December from its historic low of 0.62 percent posted during the previous month.

Analysts added bank card default rate hit the lowest post-recession rate of 3.53 percent in December as it was 3.58 percent in November.

"Overall, 2012 showed improvement in consumer credit quality," said David Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices.

"However, fourth quarter consumer default rates reversed some of the recent declines and pushed the composite default rate above its level of last May," Blitzer continued. "The principal culprits were first and second mortgages. Default rates for auto loans were roughly stable over the year and default rates for bank cards continued to drop. All loan types remain below their respective levels a year ago."

Looking at the largest U.S. metro areas, all five cities analysts cover in this report showed increases in default rates in December.

The major increases were Miami (up 41 basis points to 3.07 percent), Chicago (up 27 basis points to 2.12 percent) and Los Angeles (up 24 basis points to 1.04 percent. New York and Dallas were marginally higher by four and one basis points respectively as the Texas city kept the lowest rate among the five at 1.26 percent.

Analysts added all five cities remain below default rates they posted a year ago in December 2011.

Jointly developed by S&P Indices and Experian, Blitzer reiterated the S&P/Experian Consumer Credit Default Indices are published monthly with the intent to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien.

The indices are calculated based on data extracted from Experian's consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month.

Experian's base of data contributors includes leading banks and mortgage companies and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.

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