As the economy slowly improves, consumers have increasingly began paying their loans on time, according to Standard & Poor's Dow Jones Indices.
The S&P/Experian Consumer Credit Default Indices showed the first mortgage default rate decreased to 1.36 percent in September, a pre-recession low. Meanwhile, the second mortgage default rate fell to 0.64 percent, its lowest level in its history. The only loans that saw an increase in default rates were auto loans.
"We think it is very fair to say that 2012 has proven to be a period of financial repair for consumers," says David M. Blitzer, managing director and chairman of the index committee for S&P Dow Jones Indices. "Consumers' financial condition continues to improve as witnessed by these declining credit default rates."
Declining default rates could potentially lead to fewer foreclosures. DBRS, a credit research and ratings agency, expects foreclosures to fall in 2013. With more people turning to short sales, foreclosures should drop off in judicial states that have seen increases in recent months.