The national composite of default rates was 1.11 percent in April, the lowest rate since before the recession rocked the U.S economy. April was the seventh consecutive month the mortgage default rate dropped, according to the S&P/Experian Consumer Credit Default Indices.
"The prospect for further gains in economic activity and consumer confidence is good as shown by the continuing decline in consumer credit default rates," says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices in a press statement. "Consumer default rates have stabilized at levels similar to those seen before the financial crisis."
Five major cities (New York, Chicago, Dallas, Los Angeles, Miami) all saw default rates decrease for the second consecutive month. New York dropped 18 basis points below March's default rate, making it the largest decrease year-over-year, coming in at a rate of 1.19 percent in April 2014.
However, the default rates for bankcards and second mortgages saw their default rates increase last month, by 2.84 percent and 0.63 percent respectively. Year-over-year, first mortgages and auto loans were both lower. The auto loan rate of 0.92 percent is a new historic low beating out the previous low of 0.99 percent set last month.
The one-month uptick in consumer price inflation and the Federal Reserve's decision to decrease bond buying both failed to have significant effect on the default rates or consumer activity.
As default rates continue their decline, lenders can be better prepared for an increase demand in loans by investing in application processing software. These powerful and flexible tools can help to quickly and accurately determine the creditworthiness of applicants, protecting lenders from unnecessary risk.