Mortgages, car loans or credit cards: these are the bills people paid first during the pandemic


Mortgage payments had the lowest 30-day default rate, followed by car loan payments and credit card payments in the third quarter, according to a study by TransUnion, the consumer credit bureau. of 2020, according to a study of people who hold these three types of debt by TransUnion.

TransUnion has reviewed the 30 day overdue accounts, which is usually the first sign of payment difficulties. For the 27.8 million consumers who hold all three types of credit, mortgages had a 30-day late payment rate of 0.75%, car loans followed at a rate of 1.13%, and credit cards at 1.95%.

At various times, different credit payments have taken top priority for people. In 2016, auto loans were at the top of the hierarchy.

“The auto loan was sometimes really important to people because they needed a car to get to work,” said Matt Komos, head of research and consulting at TransUnion in the United States. “And after the housing crisis, in the last recession, when houses lost so much value, credit cards were preferred over mortgages.”

But the pandemic presented a completely different set of circumstances, Komos said.

“The house has become so important to so many people this year,” Komos said. “If people stay employed, maybe they are working from home now and home schooling their kids and they want to make sure they have a safe place to be.”

While mortgage repayment has been a priority since 2017, rising house prices, a sharp increase in the number of people working from home, and lender hardship programs that help troubled borrowers defer payments have widened. the gap between the percentage of mortgage defaults and the percentage of auto loans in arrears during the pandemic.

Prepare for the payment shock

The hardship programs offered by lenders – such as mortgage forbearance – have allowed borrowers flexibility and saved them time. If people are more than 30 days late for participating in one of these programs, it won’t show up on credit reports as overdue.

This likely helped improve mortgage performance, as millions of borrowers took advantage of forbearance programs offered by lenders soon after the start of the pandemic. The study found that subprime and quasi-prime mortgage borrowers benefited the most from these programs. Borrowers were able to delay payments and keep their account status up to date.

While credit card and auto loan hardship programs have generally lasted less, mortgage forbearance programs have been extended for several months and the Consumer Financial Protection Bureau is now considering putting foreclosures on hold until the end. of the year.

Currently, there are 2.3 million homeowners who remain on mortgage forbearance, which is 4.4% of all homeowners with mortgages, according to Black Knight, a mortgage data company.

“As people drop these hardship programs, we keep an eye out for the shock of the payments,” Komos said. “If they haven’t paid their mortgage, what happens to their other debts at that point? Are we seeing the hierarchy of payments expand even further because of the importance of the house? “

Consumers hold on to a primary credit card

Keeping at least one credit card in good standing has also become a priority for credit users during the pandemic.

Before the pandemic, consumers put their personal loan payments ahead of their credit cards. And they continued to do so during the pandemic if they had multiple cards, although the gap between credit card payments and personal loan payments has narrowed.

But that priority changed during the pandemic when a person only had one credit card and at least one personal loan. The survey found that consumers prioritize their credit card only because the loss of this valuable form of payment for online purchases and the perceived consequences of late payment would be too great.

Only 5.3 million people in the study of people with the three main types of credit had only one credit card in their wallet. While the mortgage remained the clear priority, consumers with a single credit card valued it more than their car loan as of the second quarter of 2020.

These changes, according to the study, show the increased importance of retaining access to at least one credit card as online and remote transactions have become a daily necessity for Americans during the pandemic.

“There is a feeling of ‘If I can at least keep some cash available on a card, that’s what’s going to be important when I’m in distress,” “Komos said.

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