Auto finance defaults rose for just the second time this year in October. But the 3-basis point rise is only a fraction of the largest uptick analysts from S&P Dow Jones Indices and Experian have seen during the past 36 months.
Data through October for the S&P/Experian Consumer Credit Default Indices showed the auto-finance reading increased 3 basis points on a sequential comparison to 0.92 percent. The latest rise is less than what analysts noticed back in the summer when the rate moved from 0.93 percent to 0.97 percent, according to the June and July updates.
Rewinding three years, the largest rise auto-finance defaults made occurred in last summer when the August 2017 reading jumped to 0.95 percent from 0.86 percent spotted during the previous month.
Also of note, the auto-finance default metric has remained below 1 percent since April of this year.
Meanwhile, S&P and Experian reported that the composite rate — which represents a comprehensive measure of changes in consumer credit defaults — came in unchanged in October compared to the previous month, sticking at 0.82 percent.
The bank-card default rate dropped 5 basis points to 3.09 percent.
The first mortgage default rate also was unchanged at 0.63 percent.
Looking at the data by geography, analysts noticed two of the major markets posted higher default rates in October.
The data revealed the rate for New York increased 5 basis points to 0.84 percent, while the rate for Dallas climbed 4 basis points to 0.77 percent.
The default rate for Los Angeles remained unchanged at 0.56 percent.
S&P and Experian noticed two cities watched their default rates drop.
The rate for Miami fell 11 basis points to 1.45 percent, while Chicago’s rate ticked 1 basis point lower to 0.84 percent.
After reviewing all of the latest data, David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, pointed out that October marked the sixth consecutive month of lower bank-card default rates. The rate is down 77 basis points from its peak set in April of this year.
Blitzer explained the bank-card activity has been the primary contributing factor to the concurrent decrease in the composite default rate. At 0.82 percent, the composite rate has not been lower since May 2016.
“Continued good economic results are supporting rising consumer spending without any significant increase on consumer credit defaults,” Blitzer said. “Compared to a year earlier, default rates in the three major categories — mortgages, auto loans and bank cards — are down.
“On a monthly basis, auto loans saw a small rise while the bank card defaults dropped, and mortgages were unchanged. While two of the five cities reported here saw an increase in October compared to September, four out of five cities have default rates lower than October 2017,” he continued.
Blitzer then touched on information generated by other sources.
“Three times per year, the Federal Reserve surveys senior bank lending officers on their banks’ credit and loan policies, including autos, mortgages and credit cards. The report shows that banks’ standards for both auto loans and credit card borrowing are marginally tighter now than four months ago in the previous survey,” Blitzer said.
“The mortgage picture differs: 10 percent to 12 percent of the reporting banks indicate that lending standards are easier,” he added. “The easier standards may be a response to the 25 percent to 30 percent drop in demand for mortgage loans reported by the same banks. The softness seen in existing homes sales is seen in the mortgage market.”
Jointly developed by S&P Indices and Experian, analysts noted 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.