Commercial mortgage demand drives loans: Equifax

A continuing spike in commercial mortgage applications over the March quarter has ensured an increase in business loans and assets finance, according to the latest Equifax index, with business credit demand moderate enough to outdistance falling trade credit applications.

Released this week, the Equifax March Quarterly Business Credit Demand Index has seen overall business credit applications across Australia edge ahead at a rate of 1.6 per cent for the March 2017 quarter, compared to the same period last year.

The continued increase in the volume of business loans, trade credit and asset finance applications has been robustly supported by a “significant strengthening” in commercial mortgage applications, which rose by more than a quarter, year-on-year, to 25.7 per cent.

According to Neil Shilbury, general manager of commercial and property products at Equifax, the ongoing velocity of growth here has been spurred by record low interest rates and continues despite the best attempts of regulators to cool the market.

“Growth in commercial mortgage applications was high in the March 2017 quarter, notwithstanding tightening by various regulatory bodies attempting to cool the market,” Shilbury said.

Drilling into the business loans data, Shilbury noted mortgage applications continue to strengthen, now surpassing the strong annual rates of growth recorded in the June quarter of 2015.

Growth in context

Growth in lending proposals (+7.9 per cent) also remained strong in the March quarter, but credit cards (-29.3 per cent), overdrafts (-18.7 per cent), and premium finance (-33 per cent) all dropped away.

“This high rate of growth is a trend we have seen continue from the previous quarter – commercial mortgage applications rose at a rate of 22.5 per cent in the December quarter 2016," he noted.

“However, it is important to put the growth of commercial mortgage applications in context. This is only one element of business loan applications which, in turn, is only one element of the overall Business Credit Demand Index,” he added.

Against the march quarter last year, according to Equifax, growth in business loan applications rose 3.4 per cent, growth in asset finance rose 1.8 per cent, while trade credit applications fell -0.8 per cent.

Although tempered by the fall in trade credit applications, in terms of overall growth, Shilbury told AB+F, the Index continues to display moderate growth.

“This is also the second consecutive quarter that has seen positive growth in Queensland, which looks to be leading the mining states out of the post-mining boom correction, and suggests much of the pain may have passed for businesses in this region," he said.

Equifax, a global provider of consumer credit insight, measures the volume of Australian credit applications made through the Commercial Bureau by financial institutions and major corporations in Australia.

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