Consumer credit demand continues its decline in December quarter

by Madison Utley18 Feb 2021

Consumer credit demand continued its decline in the December quarter, down -21.9% year on year; however, the data made clear the volume of credit applications for mortgages has remained notably robust. 

Further, despite the continued downward trend, the Equifax Quarterly Consumer Credit Demand Index found “encouraging signs” the rate of decline is slowing compared to the prior quarters of 2020.

While demand for credit cards (-31.7%) and personal loans (-28.13%) is still depressed, the Buy Now Pay Later and auto loan categories seem to be stabilising.

Kevin James, Equifax general manager of advisory and solutions, celebrated the “positive signs” which have followed the more extensive COVID-19 lockdowns.

And while mortgage applications are not part of the Equifax’s Consumer Credit Demand Index, the group acknowledges they are a good indicator of home buyer demand and housing turnover. As such, it has also published its housing data, revealing home loan applications for the December 2020 quarter were up +19.3% from a year ago, with Western Australia the true standout, recording the highest growth at 50.9%.

“Demand for mortgages has now experienced growth for the sixth consecutive quarter driven by low interest rates, stimulus for first home buyers and the HomeBuilder program, as well as Aussies returning home,” James said. 

In addition to Western Australia, strong demand was also evidenced in Queensland (+28.2%) and the ACT (26.6%).

The largest real estate markets were slightly more subdued, with NSW increasing by +16.4% and Victoria +9% from the December quarter the year before, as major lockdown restrictions eased.

Equifax Consumer Credit Demand Index –December 2020 Quarter