Mortgage demand grows for first time since 2021

Auto loan demand also surged but risks remain

Mortgage demand grows for first time since 2021


By Ryan Johnson

After a challenging period, there's positive news in the housing market as mortgage demand sees a turnaround, marking the first quarter of growth since 2021.

Equifax, a provider of credit information and analysis in Australia and New Zealand, has released its latest Quarterly Consumer Credit Insights - December 2023, shedding light on the state of mortgage and consumer credit.

Amidst stable interest rates and a slowdown in inflation, the fourth quarter of 2023 brought temporary relief to consumers. However, signs of financial stress persist despite this respite.

Source: Equifax Quarterly Consumer Credit Insights: December 2023

Mortgage and auto loan demand surges - Equifax

In good news for lenders and brokers alike, lending demand has surged with secured credit demand, derived from mortgages and auto loans, increasing +1.1% in Q4 2023 and outpacing the figures from the previous year.

The appetite for mortgages saw a welcome uptick, with a +0.5% increase year-on-year, signalling a long-awaited return to positive growth since 2021. Auto loan demand grew +3.9% in Q4 2023 compared to the same quarter last year.

“Stable rates have had a positive impact on mortgages, with demand share for new mortgages rising to 28% in Quarter 4 of 2023,” said Kevin James (pictured above), Equifax general manager advisory and solutions. “Conversely, refinance demand dampened, suggesting that existing mortgages are also experiencing some financial relief.”

While mortgage arrears crept up in the fourth quarter, James said the rate of acceleration in early delinquency has slowed.

“The number of accounts 30-89 days past due grew 33% year-on-year in Q4, compared to a 47% increase reported last quarter - another indication that softer economic conditions are providing some breathing room for mortgage holders,” James said.

Consumer lending risk remains

Elsewhere, unsecured credit demand, comprising credit cards, personal loans and buy now pay later (BNPL), decreased -5.0% in the December quarter.

This was driven by slowing demand for credit cards (+1.2%) in Q4 2023 versus the same period 2022), and a decline in personal loan applications (-0.7%). BNPL demand continued to fall in Q4 (-18.7%), although the rate of decline has slowed.

James said throughout last year many consumers adjusted their spending habits to cope with the higher cost of living and rising interest rates.

“In Q4, these changes were coupled with the lower rate of inflation and stabilisation of interest rates, bringing some relief to household budgets,” James said.

“This was reflected in the decreased demand for unsecured credit, as people relied less on credit cards and personal loans to bridge the financial gap.”

However, signs of stress remain. Credit card early arrears remain above 2022 levels, with accounts 90+ days past due up 15% versus Q4 2022.

“And we often see a spike in arrears in the first half of the year as festive season spending hits credit balances. We expect consumers’ financial resilience will be tested as the record spending seen in November falls due over the coming months,” James said.

What do you think of the latest lending figures from Equifax? Comment below

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