Consumer credit down, but signs of recovery

  • By AB+F Editorial

Consumer credit demand continued to fall, down 22 per cent in December compared to the previous year but there are signs of recovery in buy now, pay later and auto loans

According to data from the latest Equifax Quarterly Consumer Credit Demand Index while demand remained in decline, there are encouraging signs the rate of decline is slowing compared to the prior quarters of 2020. 

Not surprisingly, credit cards led the decline falling 32 per cent while personal loans fell 28 per cent. 

Demand for BNPL applications was relatively flat (-1.5 per cent) in the December quarter compared to the previous year following two consecutive quarters of decline. ACT, NSW and NT all experienced growth which offset reductions in other states. 

Generation Z continues to be the strong driver of BNPL demand, making up 25 per cent of total applications.

While there was a 2.8 per cent fall in auto loans, the Equifax data revealed that there has been improved demand for auto loans in all states except Victoria and Tasmania. 

Also not surprising was a pickup in mortgage demand consistent with industry and bank data. 

Home loan applications for the December quarter was up 19.3 from a year ago. 

The stand out was Western Australia, recording the highest growth at 51 per cent, likely as the result of improved consumer sentiment, government stimulus for first home buyers and a more positive outlook for the mining industry. 

In addition to Western Australia, strong demand was seen in Queensland (+28 per cent) and the ACT (26 cent). 

While growth in the largest real estate markets was not as strong, NSW increased 16 per cent and Victoria showed positive signs with strengthened demand – an increase of 9 per cent   versus the December quarter in 2019, as major lockdown restrictions eased.

“Despite the decline in overall credit demand year on year, we have seen some steady growth from the September quarter which is a positive sign following the more extensive COVID-19 lockdowns,” Equifax general manager advisory and solutions Kevin James said. 

“This has been driven by improvement in auto lending in many states, as well as personal loan applications,” he said. 

“Across all states, the market showed strong resilience, even in Victoria which was affected by the second wave of COVID-19, with numbers in the last quarter of 2020 improving considerably.” 

“Demand for mortgages has now experienced growth for the sixth consecutive quarter driven by low interest rates, stimulus for first home buyers and the HomeBuilder program, as well as Aussies returning home,” he added.