St Casimirs Mortgage Minute

The Debt Domino Effect of Homebuying

A study of 16.7 million mortgage applications from borrowers with an existing mortgage — indicating a likely move or refinancing — between 2013 and 2015 by TransUnion highlights the debt domino effect, in which consumers who are buying a home also buy a new car and increase credit card spending at the same time. Charlie Wise, co-author of the study and vice president of TransUnion's innovative solutions group, says, "Whether it's to purchase furnishings or for renovations, many consumers actually increase their card spending in the months before moving into their new residence." According to the study, consumers who apply for a new mortgage also are two to three times more likely to open a new auto loan or credit card account over the next year. New credit card originations for consumers who moved into new homes were 54 percent higher in the month after obtaining a new mortgage, and new auto originations were 84 percent higher during that period. "The folks that are refinancing are lowering their monthly payment and giving themselves a raise, and they're spending that," says Wise. "They now have additional cash flow."

From "The Debt Domino Effect of Homebuying"
CNBC (05/26/16) Dickler, Jessica