Homeowners prioritizing mortgage payments over credit cards for first time since 2008

by MPA20 Mar 2014
More homeowners are prioritizing paying their mortgages over their credit cards, according to data released by TransUnion.

In a study released this week, the credit reporting agency concluded that climbing home values have allowed many homeowners to build equity, while others finally saw their mortgages struggle above water after years of owing more than their homes were worth. An upswing in the job market and freer access to credit cards also nudged the change, according to the study.

“We are returning to the traditional trend as the forces in the marketplace that influence consumer payment preferences return to normal,” said study co-author Ezra Becker.

Mortgages have historically had a lower late-payment rate than credit cards. But that changed after the housing crash of 2008, when home prices plummeted.

“This was a measurable result of the economic environment, wherein many consumers were underwater on their mortgages and at the same time needed the liquidity afforded by credit cards to make ends meet,” Becker said.

According to the study, 3.32% of mortgages were at least 30 days overdue in September of 2008, while the late-payment rate on credit cards was lower at 3.29%. That trend continued for years.

But now, with home values on the upswing and foreclosures decreasing, the trend has reversed. In December, the late-payment rate for mortgages fell to 1.71%, while the late-payment rate on credit cards was 1.83%, according to the study.


Should CFPB have more supervision over credit agencies?