Mortgage payments trumping credit cards as distress eases

by Ryan Smith20 Sep 2013

Consumers are starting to put paying their mortgages ahead of their Visa bills again, according to a study released Thursday. That’s a reversal of a trend that began in the early days of the economic crisis, when distressed consumers would often neglect their mortgage payments to pay down their credit cards.

The study, released Thursday by credit reporting agency TransUnion, also found that distressed consumers are still likely to make their car payments before paying down their mortgage.

"The results of previous TransUnion research showed that, beginning in 2008, consumers with both a credit card and a mortgage 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. Our latest study indicates that, for the first time since the housing bubble, consumers with constrained liquidity are making their mortgage payments about as much as their credit card payments, though auto loan payments remain the top priority."

The study, which scrutinized payment behavior during a sample window between January of 2008 and December of 2012, showed that the level of mortgage delinquency has fallen to nearly the same level as credit card delinquency over that time period.

"With continued improvements in housing prices, it's probable that by the end of 2013 we will see the majority of consumers paying their mortgages ahead of their credit cards," Chaouki said.

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