2 May

TRD Insights: More homeowners are skipping mortgage payments in favor of credit card bills

first_imgCash-strapped mortgage borrowers are paying off credit cards and other consumer debt instead because those bills are lower (iStock)More homeowners are choosing to skip their monthly mortgage payments in favor of paying off other debt obligations.A newly-published Fitch Ratings report attributes the reason in part to coronavirus-related government relief programs that provide grace periods for home loans payments. Fitch also said that cash-strapped mortgage borrowers are paying off credit cards and other consumer debt instead because those bills are lower, and have greater short-term consequences.The federal government’s $2 trillion CARES Act allows homeowners with federally-backed mortgages to defer payments for up to 180 days days. Million of Americans have taken advantage of the forbearance option, though the share of loans in forbearance hit a two-month low in July.ADVERTISEMENTContinued uncertainty in the economy and the job market is also pushing people to prioritize credit card payments in order to allow for future purchases. Consumers are also more likely to keep up with auto loan payments because of the “importance of personal mobility due to the social distancing challenges with public transportation,” the report noted.Fitch said the trend matches the one set during the last global financial crisis, when U.S. consumers largely opted to pay down their credit cards and auto loans but not their mortgages. This time around, rock-bottom mortgage rates mean deferring payments for many is cheaper than ever, Fitch added.last_img

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