28 July 2010: Veda Advantage's quarterly Consumer Credit Demand Index, released today, shows consumer credit demand has not yet returned to pre-Global Financial Crisis levels. Credit card and personal loan applications for the April to June quarter remained flat (-0.2%) year-on-year. The Veda Advantage index also revealed the largest quarterly drop in mortgage credit demand in the 6 years CDI has been measured, down 20% year-on-year.
Chris Gration, Veda Advantage Head of External Relations, said rising interest rates and a 'saving rather than spending' mentality could be holding Australians back from taking on debt. "Australian consumers appear to be continuing the saving habits adopted during the 2009 downturn. Evidence suggests many people continue to focus on paying down debts rather than extending their credit," he said.
Veda Advantage's recent Australian Debt Study revealed only 8%* of Australians were looking to apply for new credit in the six months from April to September 2010. "Overall credit growth remained flat this quarter," Mr Gration said. "Our debt study also found half of Australians with credit cards were looking to reduce that debt in this quarter, however our debt study shows people in the market for credit are predominantly individuals and families on higher incomes, earning above $70 000 so there is still good quality demand for new credit in the market place for the next 6 months."
The first home owner loan market has cooled considerably in the first half of 2010, with mortgage applications down 20% compared to the same April to June period in 2009. This follows on from a 15% fall in the January to March quarter of 2010 year-on-year.
"First home owner stimulus activity levels buoyed the market in 2009, so naturally mortgage demand would taper off after the incentives of last year. Information from the Reserve Bank suggests an easing in auction clearance rates and a deceleration in mortgage growth compared to the January to March quarter of 2010. Although mortgage demand has dropped off compared to last year, we are seeing an increase in automotive consumer credit demand and a trend towards the purchase of new cars," Mr Gration said.
Mr Gration said the new responsible lending law which begins for most credit providers in January 2011, will provide more confidence for consumers, especially those using fringe lenders, and a likely boost to credit demand. "Credit providers will be encouraged to use new tools to check income and capacity to make sure consumers can repay credit without substantial hardship. Responsible lending laws will support more confident borrowing by Australian consumers and better risk measurement tools for lenders," he said. Mortgages Mortgage applications were up 2.3% compared to the previous January to March 2010 quarter. Consumer applications for mortgages fell by 20.3% in the April to June quarter of 2010, compared to the same period in 2009. Mortgage applications fell steeply in all states. Queensland fell by 28%, New South Wales by 23%, Tasmania by 22%, Western Australia by 21%, South Australia by 19%, Northern Territory by 19%, and ACT by 12%. Mortgages declined for the second consecutive quarter year-on-year, at almost the same rate as was seen in the April to June quarter of 2008, which fell by 18%.
Credit cards Credit card applications remained flat (-0.2%) over the previous June 2009 quarter, continuing their 8th consecutive quarterly decrease (since the March 2008 quarter). Applications decreased by 9% compared to the previous January to March quarter of 2010. Credit card enquiries fell for the 8th consecutive quarter year-on-year, since March 2008.
Personal loans Personal loan applications remained flat (-0.3%) in the April to June 2010 quarter, over the same period last year. In comparison to the previous January to March quarter, there was a 4.8% decrease. This was the 11th consecutive quarterly year-on-year decline in personal loan applications.
