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Mortgage payments take priority over credit cards

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Reversing a trend that dates from 2008, a new study finds that consumers were giving greater priority to making mortgage payments than to paying down their credit cards. Conducted by Transunion, the report reveals also paying off auto loans remains consumers’ top priority by a “wide margin.”

“One of the biggest impacts of the Great Recession to the credit system was its influence on consumer payment patterns,” says Ezra Becker, co-author of the study and 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. 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.”

To determine how great an impact housing prices had on the rate of payment of credit cards versus mortgages, TransUnion examined the delinquency spread between mortgages and credit cards over the past decade, and compared that spread to the Standard and Poor’s Case-Shiller 20-City Home Price Index (HPI). For instance, if the 30-day credit card delinquency rate was 1.50 percent and the 30-day mortgage delinquency rate was 2.25 percent at a given point in time, then there would be a 0.75 percent spread between the two variables.

The credit card-mortgage delinquency spread “flipped” in December 2007 in Los Angeles, meaning that was the point at which more consumers in the study were going delinquent on their mortgages than on their credit cards. This pattern continued through the end of the study in December 2013, with the delinquency spread essentially remaining the same. In contrast, Dallas experienced the reversal in payment patterns much later — beginning in June 2011 — with that reversal only lasting through September 2012.

30-day delinquency rates for consumers possessing auto loans, credit cards and mortgage loans (Delinquency rates only reflect consumers with all three credit products)
Year Mortgage Credit Card Auto Loan  
4-Sep 1.26% 2.25% 0.95%  
5-Sep 1.24% 2.24% 0.89%  
6-Sep 1.32% 2.41% 0.97%  
7-Sep 1.71% 2.51% 1.01%  
8-Sep 3.32% 3.29% 1.65%  
9-Sep 4.92% 3.99% 1.62%  
10-Sep 3.67% 2.62% 1.33%  
11-Sep 2.94% 2.24% 1.04%  
12-Sep 2.42% 1.81% 1.04%  
13-Sep 1.79% 1.86% 0.89%  
13-Dec 1.71% 1.83% 0.87%  


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