Among its myriad of effects, COVID-19 quickly changed the pecking order of borrower debt priorities, according to TransUnion.
The credit bureau and data provider tracked annual consumer patterns in their study of the global payment hierarchy. Mortgages beat out credit cards and auto loans for the lowest 30-day crime rate for the 27.8 million US consumers who hold all three credit products. While leniency programs helped dampen those numbers, the year-on-year shift during the pandemic shows how borrowers are placing greater emphasis on the importance of their homes as prices soar.
The mortgage crime rate fell to 0.75% in the third quarter of 2020 – the only rate below 1% since at least 2016 – from 1.28% a year earlier. Over the same period, the default rates for auto loans fell from 1.42% to 1.13% and for credit cards from 2.62% to 1.95%.
"Mortgage is once again the clear priority for US borrowers," said Matt Komos, TransUnion's head of research and advice in the US, in the report. "The mantra," You can't drive your home to work "doesn't have the same effect when millions of Americans wake up, shower, have breakfast, and take just a few steps to their home office."
Transunion's study showed that the perceived consequences of late payments play an important role in the changing hierarchy. About 60% of borrowers said they expected their lender to call them about missed mortgage payments, compared with 52% for credit cards.
In the future, factors such as interest rates and pandemic effects will influence borrower decisions and the overall lending landscape.
"We may continue to prioritize mortgage payments over other products as property values continue to rise, the trend to work from home persists, unemployment continues to improve, and various other factors that could keep the mortgage a top priority." Komos told NMN.