Consumers applying for a new mortgage are on average two to three times more likely to open a new auto loan or credit card account over the next 12 months, according to a new TransUnion study. In fact, many of these consumers open these accounts as soon as one month after their existing mortgage payoff.  

The findings were released Thursday at TransUnion's Financial Services Summit. The study focused on mortgage applicants in the prime or better risk tiers with an existing mortgage -- those who are likely moving or refinancing.  "Our research found that consumers either purchasing new homes or re-financing their mortgage loans are far more likely to open a new auto loan or credit card soon after this major life event, many within one month," said Ezra Becker, co-author of the study and senior vice president of research and consulting for TransUnion. "This finding is important, both because it quantitatively confirms the conventional wisdom and because it illustrates how necessary it is to look across products to get the full picture of consumer credit behavior.” The study found that prime or better mortgage applicants on average are over 50% as likely to open a new credit card over the next 12 months following a mortgage inquiry compared to the overall population. These same consumers can be up to three times as likely to open a new auto loan in that same 12 month period. The study also found that average daily credit card originations for consumers who moved into new homes were 54% higher 30 days after paying off a mortgage compared to 30 days prior. Average daily auto originations were 84% higher in that same timeframe. Nearly identical credit card and auto origination trends were observed for consumers who refinanced an existing mortgage. "Clearly consumers who are planning to move or refinance their mortgage wait until after that event to seek new credit -- but once that new mortgage event occurs, their demand far outstrips the overall population. This information is particularly valuable for lenders who are seeking credit-active consumers with higher demand for new credit cards and auto loans; this population is much more likely to respond to new offers, making them an attractive segment that lenders can now identify," added Becker. According to TransUnion's research, for existing mortgage borrowers who move or refinance, 71% of all mortgage inquiries occur between 30 and 90 days prior to existing mortgage payoff and new mortgage origination. In this timeframe, consumers who are preparing to originate a new mortgage change their credit card spending and balance behaviors.  Consumers significantly increase credit card spend -- at a rate of two to three times -- and begin building balances in the months prior to mortgage payoff and new mortgage originations, not after. Contrary to popular belief, the study also found that consumers increase credit card spending -- up to three times higher than levels six months earlier -- in the month prior to paying off their existing mortgages.  "A longheld assumption among lenders is that new mortgage applicants spend less on their credit cards prior to their mortgage closing event -- either to ensure their credit picture does not change or simply because they anticipate spending more once they move into their new home," said Charlie Wise, co-author of the study and vice president of TransUnion's innovative solutions group. "Our research indicates that millions of consumers actually increase their card spending in the months before the new mortgage origination. Whether it's to purchase furnishings or make updates to their existing property, many consumers who move increase their spending before moving into their new residence.” "Card spending increases are even greater for mortgage borrowers who refinance. These consumers may be anticipating lower mortgage payments, and take advantage of the greater available cash flow by increasing card spending in the months before their refinancing. They may benefit from increased credit limits on their cards. Lenders can take advantage of these insights by identifying existing cardholders with mortgage inquiries for proactive credit line increases," added Wise.  TransUnion's study included 16.7 million consumers who paid-off their mortgages and moved with new mortgages or refinanced their existing mortgages between Q1 2013 and Q2 2015. The study observed consumers in the prime or better risk tiers, who make up the large majority of the mortgage-seeking population. In fact, 89% of consumers who took on a new mortgage to move into a new home belonged to these risk tiers. Approximately 85% of consumers who refinanced their mortgage loans belonged to the prime or better risk tiers. 

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