Consumers Once Again Paying Mortgages Before Credit Cards
Consumers are once again making their mortgage payments ahead of paying their credit card bills, according to new research from TransUnion. This reverses the unusual trend that developed in September 2008 after the housing bust.
When the housing market crashed, a unique pattern developed in the way Americans pay bills. Consumers were focusing more on their credit card payments than they were on their mortgage loans. This remained in effect until the end of 2013, when mortgages started to regain their importance.
The payment trends were strongly linked to the value of a person’s home and the level of unemployment in their area. People with higher priced homes in areas with high unemployment rates were more likely to pay on their credit cards rather than their mortgage. At the peak of the last decade, nearly 5% of consumers were delinquent by at least 30 days on their mortgage, while only 4% were delinquent on their credit cards.
“One of the biggest impacts of the Great Recession to the credit system was its influence on consumer payment patterns,” said Ezra Becker, vice president of research and consulting for TransUnion. “As unemployment rose and home prices cratered, increasingly more consumers were faced with financial constraints and had to make difficult choices–and many chose to value their credit card relationships above their mortgages.
Areas of the country that were unaffected by the housing bubble did not experience this issue as much as others.