The data also show the impact of general improvement in the housing market in most parts of the country. New York and Dallas reported their lowest mortgage default rates since April 2004, when the data was first collected. Miami—one of the hardest hit cities by the housing collapse—has begun seeing default rates decline. Default rates also fell in Chicago. But Los Angeles reported a sharp increase in defaults and foreclosures through May, the latest data available.
In addition to showing that households are breathing a little easier, the numbers should help concerns about an expected rise in interest rates later this year.
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"The combination of low debt service and economic expansion should ease worries about the fallout some fear when the Federal Reserve boosts interest rates," according to S&P analyst David Blitzer.
Lower default rates aren't a sign that consumers are cutting back on spending, said Blitzer. He noted that consumer debt payments make up near record low levels of household income and that consumer wealth hit new highs in the first quarter of this year.