Solid growth in consumer credit shows for the first time in over a year

Veda Quarterly Business Credit Demand Index: December 2012

• Overall consumer credit demand rises 4% year on year.
• Credit card applications down 2% year on year.
• Personal loan applications up 10% year on year.
• Mortgage enquiries remain flat; suggests house price growth may be subdued in first half of this year.

Sydney, Australia, 30 January 2013: Veda, Asia-Pacific's leading provider of consumer and commercial data intelligence and insights today revealed the results of its consumer demand index for the fourth calendar quarter of 2012.  The index, which measures the change in credit demand for the December quarter compared to the same period in 2011, showed that overall consumer credit demand increased by 4.1% over the past year.
On a state-by-state basis, credit card applications have been weak in all states over the past year.  Falls have been recorded in NSW (-1.5%), VIC (-2.3%), QLD (-2.5%), SA (-1.5%), and TAS (-5.3%).  WA (+1.0%) is the only state where credit card applications are higher over the past year.
Growth in personal loan applications has been strong across all states over the past year.  Double-digit growth over the year to December was recorded in the NT (+14.3%), WA (+13.0%), VIC (+11.8%), SA (+11.0%), TAS (+12.0%), while NSW (+8.6%), and QLD (+6.2%) also demonstrated increases. 
"Consumer credit is showing a solid pace of growth for the first time in over a year.  That reflects personal loans being taken out in greater numbers to finance a period of car-buying, with a sharp rise in motor vehicle purchases recorded over the past year.  We saw the credit demand trend move upwards through the December quarter, which was all driven by personal loans, suggesting that Australian consumers were feeling good enough to borrow for some bigger-ticket purchases," said Angus Luffman, General Manager of Consumer Risk at Veda.
"The continuing weakness in credit cards and mortgage enquiries still indicates that the attitude of consumers towards borrowing is still broadly one of caution - while there are encouraging signs, it's still too early to call a sustained turnaround in the weak consumer credit environment of the past few years," Luffman added."
Overall mortgage enquiries have remained flat, decreasing by 0.7% over the year to the December quarter.  However there are large differences in housing markets across the country.  Mortgage enquiries have picked up very strongly in the NT (+12.6%) and WA (+11.1%) where activity is being supported by the resources boom.  Elsewhere, SA (+4.8%) is now showing signs of improvement, but mortgage enquiries are close to flat in Victoria (+0.5%), and have fallen over the past year in NSW (-5.7%), and Queensland (-2.8%).  TAS (-7.6%) is showing the weakest performance over the past year.
Equifax's data historically shows that mortgage enquiries are a good indicator of home buyer demand and an excellent indicator of housing turnover, with movements in mortgage enquiries tending to lead movements in house prices by around six to nine months. 
"Housing markets have, in the majority, been weak since late 2010, and there is little evidence in the latest Veda data that the RBA rate cuts are having much effect in reigniting housing turnover with the level of mortgage applications staying flat since halting a two year decline in the March 2012 quarter.
"This generally soft  mortgage applicant demand suggests that house price growth will be relatively subdued for at least the first half of 2013," said Luffman.