Consumers still paying credit cards over mortgages
Credit card over mortgage trend continues
Consumers are still apt to pay credit cards over mortgages, a trend first seen in early 2008, TransUnion said in a recent report.
According to TransUnion, the trend of consumers paying credit cards on time before mortgages first occurred in the first quarter (Q1) of 2008 and has yet to revert back to the previously established payment hierarchy of paying mortgages first.
The percentage of consumers delinquent on mortgages but current on credit cards stood at 6.9 percent at the end of the fourth quarter (Q4) 2011. This percentage stood 4.3 percent in Q1 2008 and reached as high as 7.4 percent in the third quarter (Q3) of 2010.
“Though the percentage of consumers delinquent on mortgages and current on credit cards has dropped in the last year, the payment hierarchy shift is as strong as it was one year ago, with consumers opting to pay their credit cards before their mortgage payments,” Matt Komos, a consultant in TransUnion’s analytics and decisioning services business unit, said in s statement.
“We established in our earlier study that this payment hierarchy reversal was chiefly the result of two factors: the decline in house prices and high and persistent unemployment levels.”
In another interesting twist, the most recent data from TransUnion revealed that consumers are now putting auto loans at the very top of the chain. According to the data, consumers are now placing auto loans before both credit cards and mortgages when it comes to making payments on time.
“It appears that the shift back to prioritizing mortgage payments ahead of credit cards — or auto loans — may only occur once the housing market has stabilized and begins its recovery and the unemployment situation shows significant improvement,” Komos said. “Until that time, based on the last four years of data, it would seem that the current payment patterns will remain status quo.”