Consumer credit demand weak, despite record mortgage enquiries
August 30, 2009
Consumer credit demand (credit card and personal loan enquires) fell by 20% in the April to June quarter in 2009 compared to the same period last year, according to Veda Advantage’s Consumer Credit Demand Index - which showed a surge in mortgage applications. The figures for the month of July 2009 continue this trend, with credit card and personal loan applications also falling by 20% compared to July 2008. The results indicate Australian consumers remain cautious about taking on more debt, except when it comes to property.
Mortgage Applications
The Australian housing market resilience was epitomised by the overall number of mortgage applications in April to June quarter - which were the highest on the Index’s records over the past five years, increasing by 28% year-on-year. This was also the highest quarterly growth for mortgage applications over the past five years, closely followed by the previous January to March quarter which showed a 14% increase year-on-year.
The month of July saw a continuation of this trend with mortgage applications increasing by 25% on last year, with early indications for August mortgage applications continuing this strong growth, the information services provider advised.
Mortgage Enquiry Demographics
The April to June 2009 quarter saw a decline in the number of mortgage applications made by 18 to 25 year-olds, although mortgage applications made by people aged below 25 was still significantly higher compared to the April to June quarter in 2008. The boost to this demographic’s share can be put down to the encouragement to enter the housing market that has been provided by the Boost to the First Home Owners Grant.
The share of mortgage applications made by 18 to 25 year olds peaked at 11.3% in the January to March quarter of 2009, before settling at 10% June quarter this year. Almost 75% of mortgage applications in the April to June quarter were made by people above the age of 31 years.
“This continuing high level of demand is a response to high levels of housing affordability, low interest rates and the Federal Government’s first home buyers’ grant,” Russell Evans, Veda Advantage’s General Manager, said. “(We have) seen a further rise in the number of quality of mortgage applicants which will provide some comfort to regulators and credit providers, especially if housing affordability eases over coming months as interest rates rise and the Federal government’s subsidy is phased out.”
Personal Loans / Credit Cards
Personal loan applications declined for the seventh consecutive quarter, down 6.4% on the previous quarter and 17% year-on-year. Credit card enquiries also fell, by 12.4% and 22% year-on-year.
Both personal loan and credit card default amounts have increased in the second quarter of this year (April to June) - with the average default amount for both types of accounts at a six year high.
The slowdown in business credit appliactions moderated, down just 2.1 per cent.
“Over coming months we will be looking to see signs of strength slowly returning to consumer credit demand, and historically high levels of mortgage applications moderating somewhat,” Mr Evans concluded.