Loan default rates are creeping higher, but the increases are not a problem as of now, according to a report released Tuesday by S&P Dow Jones Indices and Experian.
The increase is being driven by an uptick in the default rates on bank credit and debit cards, which, at 3.57 percent, are at the highest level since May 2013, according to the report.
The indices, which measure changes in consumer credit defaults, show that the composite default rate for auto, home and bank cards increased 4 basis points from December to January and increased 3 basis points year over year to 0.95 percent.
The biggest jump was in bank card defaults, which rose 13 basis points from December to January and 36 basis points from January 2017 to January 2018 to 3.57 percent.
The only default rates that improved were in auto loans, where the default rate dropped a mere 3 basis points from December to January.
Defaults on first mortgages were steady year over year and increased 4 basis points December to January.
The report also looks at default rates in five major cities: New York City, Los Angeles, Chicago, Miami and Dallas. None of the five saw a decline in composite default rates in January. Miami had the largest increase, up 29 basis points to 1.27 percent.
“The economy is growing, consumers are bullish and they’re spending money,” said David M. Blitzer, the managing director and chairman of the Index Committee at S&P Dow Jones Indices, in a statement.
“We are seeing the usual result of spending growth: modest increases in consumer credit defaults—especially in bank cards—and overall increases in the level of debt in the economy,” he added. But the increases are not an immediate problem.
“The Federal Reserve is expected to continue raising interest rates,” he said. “Home mortgage rates, which respond to movements in the financial markets, have risen from 4 percent to about 4.4 percent since the beginning of 2018.