Consumers Revert to Paying Mortgages First
Consumers have returned to payment patterns that were typical before the Great Recession, according to one of the three nationwide credit reporting bureaus.
A Sept. 19 TransUnion report said consumers are once again making their mortgage payments first before making payments on auto loans and credit card balances.
During the Great Recession, the opposite occurred.
“We had previously determined that, beginning in 2008, consumers had a higher propensity to go delinquent on their mortgages than on their credit cards—a reversal of traditional payment patterns,” said Steve Chaouki, co-author of the study and group vice president in TransUnion’s financial services business unit.
“This occurred in an economic environment marked by the build-up and bursting of the housing bubble. In fact, it is broadly believed that the shift in payment preferences was largely derived from the struggles of the housing market. For the first time since the housing bubble, we now see consumers valuing their mortgage payments as much as their credit cards, though auto loans remain the most valued of the three.”
Transunion examined average housing prices in major metropolitan areas along with the spread between credit card and mortgage loan delinquencies in those areas over the same periods.
Antoni Guitart, director of analytical services for TransUnion, said the credit bureau does not survey consumers about their motivations. However, he said consumer payment data supports different theories about the reasons underlying changes in behavior.
For example, the credit bureau said it found a strong correlation between housing prices and payment behavior. In metropolitan areas like Los Angeles, where housing prices dropped significantly but then rebounded, a large number of consumers paid their credit card bills first during the downturn. However, consumers returned to previous patterns as home prices increased, Guitart said.