Consumers continue to place a higher priority on making their credit card payments than their mortgage payments, affirming a trend that began with the recession, according to a new data TransUnion released this week.
TransUnion’s research suggests that as real estate values have fallen, especially among consumers with lower average credit scores, keeping up with credit card payments has become more important to their daily financial survival.
The trend emerged during the first quarter of 2008, when an earlier TransUnion study found that the percentage of consumers current on credit cards and delinquent on mortgages had for the first time surpassed the percentage of those current on mortgages and delinquent on credit cards.
TransUnion’s latest research, drawing on data gathered from 2007 through the third quarter of last year, involved consumers who had at least one credit card and a mortgage and were at least 30 days late on a payment. It found that credit card payments continue to be higher in consumers’ payment hierarchies than are mortgage payments. TranUnion gathered its data from its proprietary historical database of 27 million anonymous consumer records randomly sampled every quarter from its national consumer credit database.
The percentage of consumers current on their credit cards and delinquent on their mortgages rose to 6.6% during the quarter ended Sept. 30, up from 4.3% during the quarter ended March 31, 2008. Conversely, the percentage of consumers current on their mortgages and delinquent on their credit cards during the same time period decreased to 3.6% from 4.1%.
The payment-hierarchy shifts were more pronounced in states hardest hit by the real estate downturn, TransUnion says. In Florida, where housing values plunged, the percentage of consumers current on their credit cards but delinquent on their mortgages increased to 12.4% during the third quarter of 2009 from 5.1% during the same period two years earlier, and in California the same variable rose to 10.2% from 3.5%.
“The implosion of the mortgage industry over the last 24 months, the resetting of adjustable-rate mortgages and the weak job market have all come to together to redefine how consumers are managing their finances and meeting (or not meeting) their credit obligations,” Ezra Becker, director of consulting and strategy in TransUnion’s financial services business unit, said in a statement. “The financial-services industry must recognize and adjust to the payment-hierarchy shift with judicious modifications to business models, new assessments of specific areas of risk, and by strategic revisions to acquisition and account management strategies.”
