Does anyone understand what the default rates mean?

I am wondering if default rates take account of expected market conditions over the next few years.

In particular interest rates are currently very low and there is a high chance that over the life of a five year loan made today interest rates will rise. Whilst the money I lend will be fixed the borrow is likely to have other debt which won't be fixed or at least won't be fixed for its entire life. The conditions which cause defaults might be about to shift (slightly).

Anyone lending on Zopa in 2008 found out that default rates differed from those expected. Obviously not everything is predictable and and even the BoE governor's predictions keep on changing, but I would be interested to find out from someone who knows do they take account of expected conditions.

It seems to me that there are a number of possibilities:-

• Default rates are expressed in very long term and so are oblivious to current/expected conditions,
  
• Default rates include current conditions, but assume that they remain constant,
  
• Default rates do include estimates of future economic movements and change all the time,
  
• Default rates are defined in terms of some idealistic 'normal' conditions,
  
• Default rates are absolute, but the band a borrower is assigned to might change depending upon the current and expected conditions.
  

If someone actually knows (westonkevRS?) I'd love to hear