But higher growth in personal loans, credit cards, says Equifax
Demand for mortgage credit has fallen by almost a third in New Zealand in the past 12 months, according to new data from Equifax.
The Equifax NZ Quarterly Consumer Credit Demand Index: September Quarter 2022 shows that mortgage demand fell 31.8% year on year and consumer credit demand was down -6%. However, unsecured credit demand (personal loans and credit cards) rose 7.1% in the 12 months to September 2022.
The credit bureau’s September index showed an overall improvement in consumer enquiry volumes for the quarter ending Sept. 30 compared with the previous quarter. The report measures applications for retail credit products including credit cards, personal loans and home loans.
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Equifax managing director Angus Luffman (pictured above) said mortgage demand continued to be well down on 2021.
“Mortgage demand also experienced lower performance by comparison with unsecured credit demand, although quarterly volumes for 2022 to date are at or above pre-pandemic levels,” Luffman said. “Meanwhile, unsecured credit demand is up 7.1% year-on-year for the September quarter, which has been driven mainly by an 18% uplift in credit card volumes.”
Equifax found the Canterbury region had consistently performed better compared to earlier quarters, with a year-on-year reduction in home loan enquiry volumes of 26.8% in the September 2022 quarter. The West Coast and Taranaki were the big improvers against previously quarterly movements, down 22.3% and 24.4% respectively for the same period.
Luffman said mortgage applications were a lead indicator of housing turnover and therefore price movement.
“Whilst there has been some improvement over the course of 2022, mortgage demand remains very soft as a significant proportion of consumers remain cautious about the market, with concerns around future OCR increases, together with reductions in house valuations,” he said. “We expect cautiousness to remain in 2023 as the Reserve Bank seeks to tackle inflationary pressures through OCR changes.”
Luffman said the improved trend in credit cards was across most regions, with Auckland being the strongest.
“Only three regions – Gisborne, Wanganui and Marlborough – experienced softer demand for unsecured credit with a year-on-year reduction in credit card enquiries of -7.8%, -6.3% and -8.0%, respectively,” he said. “Personal loan demand has declined in most regions except for Auckland (up +15.0%) and Wellington (up +1.3%) in the September 2022 quarter.”
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Luffman said whilst there were different trends for credit card and personal loan demand, there were common trends in the average amounts for credit applications which had increased quite substantially over the course of 2022.
“Across all age bands, average credit card enquiry amounts are increasing, most notably for consumers aged between 21 and 25 years from 2021 to 2022 to date,” he said.
That segment had experienced a 35.1% increase in average credit card enquiry amount to $4,800. By comparison, the average credit card enquiry amount for all consumers across the same periods increased by 22% to $6,400.
Equifax was also seeing some increases for personal loan enquiry amounts, with an average enquiry amount in 2022 at $17,000.
“By age bands, consumers aged below 25 years represent the largest increase in average personal loan enquiry amount from 2021 to 2022, this increase has been 15.6% to $14,300,” Luffman said. “The increase in the cost of goods and underlying assets will play through to the amount of unsecured credit being applied for.”
