Despite a slight rise in the first and second mortgage default rate at the start of the year, both rates are still low compared to last year and present no cause for alarm, according to the January S&P/Experian Consumer Credit Default Indices.

The monthly report gives a comprehensive measure of changes in consumer credit defaults.

David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices, noted that consumer credit default rates on mortgages and auto loans remain low and stable.

The first mortgage default rate increased to .72 in January, compared to .71 in December, and .86 in January of last year.

Similarly, the second mortgage default increased to .48, compared to .41 in December, and .65 in January of last year.

The chart below shows the five different consumer credit default indices.

Click to enlarge

mortgage default rate

(Source: S&P/Experian Consumer Credit Default Indices)

“Current default levels do not present any immediate concerns for the economy,” said Blitzer. “Even if interest rates were to increase much faster than the Fed or most analysts currently expect, the cost of borrowing money is unlikely to create problems for consumers.”

The report gives the first update for the year and comes off the heels of a low default rate environment in 2016.

At the end of last year, Blitzer predicted that the favorable default trends would likely be tested in 2017 as interest rates rise. So far, they’ve only slightly increased.

The latest Freddie Mac report noted that the 30-year fixed-rate mortgage now sits at 4.15%, up from 3.65% a year ago.

Looking ahead, Blitzer said the weak spot, if there is one, would come with a rise in unemployment and an economic downturn. 

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