Personal loans, mortgages buck trend in Equifax index
Supply chain issues and a resurgence of COVID-19 cases led to consumer credit demand easing in the last quarter of 2021.
Figures released by one of Australia’s leading credit reporting agencies Equifax showed that while overall consumer credit demand for the December 2021 quarter was up 4.7% on the corresponding period in 2020, the rate of growth slowed from Q3 2021.
It continued to trail pre-COVID demand with Q4 2021 demand down 18.3% compared to Q4 2019.
The Equifax Quarterly Consumer Credit Demand Index (Dec 2021) measures the volume of credit applications for credit cards, personal loans, buy now pay later (BNPL) and auto loans.
The index revealed overall consumer credit growth was led by increased demand for personal loans, up 23%. It marked the highest year-on-year growth for personal loans in the past four quarters, with demand edging back towards pre-COVID levels.
However, credit card applications fell 6.3% compared to the December 2020 quarter. Tasmania was the only state or territory to record an increase in credit card demand in Q4, while NSW recorded the largest decline. Auto loan applications were down 3.1%.
Mortgage demand continued to remain strong, up 9%. Buy now pay later applications rose slightly, up 0.9%.
Equifax general manager advisory and solutions Kevin James (pictured) said the easing of consumer credit demand in Q4 reflected Australia’s uneven COVID recovery.
“A number of industries were left vulnerable in the face of Omicron, with workers in industries such as tourism and hospitality particularly hard hit by the ‘shadow lockdowns’ experienced in several states,” James said.
“The spike in cases around the festive period, usually a time of higher spending, meant consumers were wary of spending on traditional holiday activities like travelling and entertaining.”
Mortgages also remain up on pre-COVID levels, up 29.9% compared to Q4 2019, with 62% of enquiries in 2021 coming from consumers with high credit scores from 900-1,100.
“The percentage of mortgage enquiries from people with high credit scores has been growing since 2018, reflecting a property market that has been increasingly dominated by investors - a trend that looks set to continue into 2022,” said James.
BNPL applications’ small lift of 0.9% was a steep drop from Q3, when BNPL applications were up 31.4%. NSW was the only state to experience a decrease in demand (-7.9% vs. Q4 2020), influenced by the Omicron lockdowns.
“The drop in demand for BNPL suggests the market is entering a more mature state,” James said. “However, we expect to see another phase of growth for BNPL as the big banks and traditional financiers enter the market with their own products.
“Members of older demographics, who might appreciate the convenience of BNPL but are reluctant to engage with newer providers, may be more willing to engage with a BNPL option from an established financial institution.”
James said Tasmania was the only state or territory to record an increase in credit card demand in Q4, while NSW recorded the largest decline.
“The downturn was a reflection of reduced consumer confidence during the Delta variant recovery period and the onset of Omicron,” he said.
Although auto loan demand fell 3.1%, this continued to vary between states.
“Supply chain issues contributed to mixed auto loan demand across the country, and is likely to be an ongoing challenge for the industry,” he noted.
