Equifax have released their Quarterly Consumer Credit Demand Index for March 2021, with strong signs of recovery for the auto and mortgage sectors but declines for personal loans and credit cards.
Equifax, who provide credit information and analytics across Australia and New Zealand, charted the volumes of loan applications in all states and territories for their index, which is widely respected as one of the best indicators of finance market trends.
The top line stories for brokers were that mortgage demand went up by 23.5% on the same quarter in March 2021, hardly surprising given the ongoing property boom, with New South Wales and Queensland leading the way.
Brokers will also be heartened to see the demand for auto finance rise, and a general shift towards asset-based lending and away from liabilities such as credit cards.
The rise of Buy Now, Pay Later (BNPL) has also eaten into the lower end of the personal loan market, though according to Kevin James, General Manager Advisory and Solutions at Equifax, there are still green shoots at the top end.
“The persona of the person who uses BNPL, is closer to the personal loan market, rather than the credit card market,” he said. “The propositions are so different as well: personal loans have started to get some growth back again, while BNPL absolutely took off when the pandemic struck. That tailed off, whereas the personal loan took a hit that has now started to grow as well.”
While BNPL and personal appear to play in the same place, it is increasingly clear that BNPL is taking the lower end of the market while personal loans have the higher amounts, as shown by lenders such as MoneyPlace, who recently announced a market-leading $80,000 unsecured product.
“The personal loan term is a much longer term than BNPL,” said James. “What you find in the personal loan space is that, because of support from the government, support from lenders and withdrawals from superannuation, people have paid off high interest rate debt. The total indebtedness on the personal loan level, I’m expecting to see has dropped.”
“But that doesn’t mean that the amount of new personal loans hasn’t increased. People are cashed up a bit more, because savings have increased. That’s hammered the credit card market. Credit cards are international, and so they haven’t recovered.”
“When we talk asset, we’re talking the auto industry. Assets and mortgage are the two that are best growing. We know about the property boom, but the used car market has also had a boom. People are using public transport less, people working two days in the office and so drive in. But you struggle to get new cars now, so people have gravitated. Add in that people aren’t travelling internationally, so the RV market has grown.”
“When the used car market is up, it’s more prone personal loans, for the purpose of private to private purchases. That doesn’t play into the used car dealer market: you’ll see it in the broker network not as an auto loan but coming through as a personal loan because of the complexity that comes with auto loans, things like PPSR registration, change of ownership. You can see why they’ll tend to do it as a personal loan.”