Consumers paying Credit Cards before the Mortgage?

Citing its data from recent years, TransUnion observed that before 2008, consumers for decades tended to pay their mortgage first “because it was their greatest asset,” says Steve Chaouki, group vice president for TransUnion’s financial services unit.

But the crash in home values that began in 2008, coupled with rising unemployment, caused consumers for the first time to begin putting a higher priority on making credit card payments over mortgages and auto loans.

“Consumers see that as their home values declined, credit cards represented liquidity, which is a more valuable commodity during an economic crisis,” Chaouki says.

The economy may be improving, but the underlying factors that put credit cards at the top of the bill-payment hierarchy persist, he says.

“We may see the payment hierarchy revert to the more-traditional setup where people pay their mortgages first when there is some real home equity to protect, or when credit becomes so freely available that it won’t be seen as a rare commodity to preserve,” Chaouki says.

It “will probably be a long time” before consumer credit lines, which many lenders cut during the crisis, become so abundant that consumers feel they can put credit card bills lower on the priority list, he says

NATIONAL RATE SURVEY RESULTS
Dec 9th, 2011 (Bankrate.com)

30-year Conventional:         
4.24% — with avg. points: 0.36 pts

 15-year Conventional:         
3.48% — with avg. points: 0.36 pts                                                                                          

 30-year FHA:          
3.97% — with avg. points: 0.36 pts
5-year Conventional ARM:           
3.18% — with avg. points: 0.36 pts

 

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