Consumer Credit Demand up, as credit card and Buy Now Pay Later applications increase

Equifax Quarterly Consumer Credit Demand Index: June 2022

• Overall consumer credit applications increased (+10.2% vs June quarter 2021)
  • Credit card applications grew +6.0% (vs June quarter 2021)
  • Personal loan applications up +4.2% (vs June quarter 2021)
  • Buy now pay later applications increased +42.2% (vs June quarter 2021)
  • Auto loan applications reduced by -15.1% (vs June quarter 2021)
• Mortgage applications declined -5.3% (vs June quarter 2021)

SYDNEY – 16 August 2022 – Consumer credit demand grew +10.2% in Q2 2022 compared to the same period last year driven by growth in unsecured credit, according to the latest Equifax Quarterly Consumer Credit Demand Index (June 2022). Mortgage demand continued to ease, falling -5.3% compared to the June 2021 quarter.

Released today by Equifax, the global data, analytics and technology company and leading provider of credit information and analysis in Australia and New Zealand, the index measures the volume of credit applications for credit cards, personal loans, buy now pay later (BNPL) and auto loans.

According to the latest data, credit card demand has rebounded, while demand for buy now pay later has surged. Personal loan applications also rose, but this growth was offset by an increase in arrears, which climbed to the highest levels since the start of the pandemic.

Kevin James, General Manager Advisory and Solutions, Equifax, said: “The increase in arrears for personal loans could be a sign of greater stress to come. Activity in the personal loan market is often an indicator of future trends in other areas of consumer credit.

“We’ve seen this play out in overseas markets. According to research from Equifax from the US, subprime consumer arrears in personal loans were among the first to be impacted by inflationary pressures.”

Mortgage demand declined in all states, with the exception of Queensland and South Australia. These declines mark an adjustment from the inflated 2021 housing market, which was buoyed by historically low interest rates.  The greatest declines were seen in NSW, ACT and Victoria - the states that had the strongest mortgage demand growth during 2021. 

Overall, consumer credit applications were up +10.2% in the June 2022 quarter compared to the same quarter in 2021, and increased +39.8% compared to the first full Quarter of lockdowns in Q2 2020.

Demand for buy now pay later increased significantly this quarter (+42.2%)  despite turbulence in the sector. Personal loan demand also grew, up +4.2% compared to Q2 2021, surpassing pre-covid levels. 

Credit card demand increased this quarter, up +6.0% year-on-year after three consecutive quarters in decline. 

“The recent increase in credit card demand may have been influenced by the return of international travel, with many consumers using credit cards to earn points and for overseas spending. As travel continues to increase, we may see further growth in credit card demand going forward,” said James.

Auto loan applications declined in the June quarter, down -15.1% compared to the same quarter in 2021. 

TABLE 1: Consumer Credit Demand by State (VS same quarter 2021)

Mortgage Demand

*Low volumes

IMAGE 1: Consumer Macro Credit Demand – Quarterly YOY

IMAGE 2: Consumer Credit Applications – Indexed by Type

*The data has been re-indexed* from 2018 to account for the recent inclusion of Buy Now Pay Later applications:
Re-indexed data to commence in 2018 (previously 2015)
Added buy now pay later and auto loan credit enquiries as a separate trendline (previously rolled up into personal loans)

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NOTE TO EDITORS

The Quarterly Consumer Credit Demand Index by Equifax measures the volume of credit card, personal loan applications, Buy Now Pay Later and auto loan applications that go through the Equifax Consumer Credit Bureau by financial services credit providers in Australia. Credit applications represent an intention by consumers to acquire credit and in turn spend; therefore, the index is a lead indicator. This differs to other market measures published by the RBA which measure credit provided by financial institutions (i.e. balances outstanding).

DISCLAIMER

Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.