For Americans with mortgages, auto payments, and credit cards, a new TransUnion study shows paying their mortgage was a top priority during the pandemic.
During the pandemic as an American fought To keep up with all of her home order payments and economic shutdown, paying her mortgage remained a priority.
TransUnion conducted a payment hierarchy study that focused on the country’s three most popular credit products – auto loans, credit cards, and mortgages. As of the third quarter of 2020, around 27.8 million consumers held all three loans, and mortgages clearly took precedence over the other loan products.
Although this momentum has continued since the fourth quarter of 2017, the pandemic has resulted in mortgages being given even higher priority than other loan products.
For those consumers who have auto loans, credit cards, and mortgages, the default rate for payments due more than 30 days after due 12 months after observation was lowest for mortgages at 0.75 percent as of the third quarter. Car loans had the second lowest crime rate at 1.13 percent, followed by credit cards at 1.95 percent.
TransUnion stated that this is likely related to the spike in property prices in recent years, as property markets across the country have remained strong and consumers are more likely to want to protect the equity in their homes. Lockdowns and home-to-work / school relocation also resulted in ongoing home loan payments becoming increasingly prominent in 2020.
“Mortgage is once again the clear priority for US borrowers,” said Matt Komos, director of research and advisory at TransUnion in the US, of Americans waking up, showering, eating breakfast and just a few steps to their home office. “
Of course, these results were also heavily influenced by dissemination Mortgage Forbearance Programs. Mortgage indulgence continues to pull back from last summer’s highs, but it’s still around 2.3 million homeowners do not pay their monthly mortgage payments according to the latest figures from the Mortgage Bankers Association (MBA).
TransUnion’s survey shows that Americans rated their mortgages versus other loans because the loan product had the highest perceived value of all expenses. In addition, six in ten consumers expected a call from their lender if they missed a mortgage payment, and more than half (52 percent) said a missed payment would have a negative impact on their creditworthiness. Almost one in five consumers (17 percent) said they would suffer a foreclosure or retake their home if they missed a mortgage payment.
The prioritization of payments was postponed when a consumer only had one card. Of the 27.8 million consumers in the study who had a car loan, credit card, and mortgage, only 5.3 million people had a credit card in their wallet. For this subset of the population, the mortgage remains the clear priority, but consumers with only one credit card rated the card more than their car loan as of Q2 2020. This shift emphasizes the growing importance of maintaining access to at least one credit card nearer than online commerce and digital transactions have become a daily necessity for many households.
“The pandemic has changed so much in the world, but understanding why consumers make important credit decisions is only to better serve the credit ecosystem going forward,” Komos said.
Email Kelsey Ramirez