Mortgage demand drops in March quarter: Equifax

Equifax’s Quarterly Consumer Credit Insights – March 2024 report has shown mortgage demand declined 4.5 per cent during the first quarter of this year, drawing back the 0.5 per cent growth recorded in the previous quarter.

The December quarter’s lift in mortgage demand marked the first quarter of positive growth since 2021 as the stabilisation of interest rates had a positive impact on mortgages.

Auto loan demand increased 4.7 per cent during the March quarter of 2024 when compared to the same quarter of 2023, while secured credit demand (derived from both mortgages and auto loans) fell 2.8 per cent on the March quarter of 2023.

Despite the fall in mortgage demand, average limits and arrears continued to rise in this quarter.

These figures come as the Australian Bureau of Statistics’ (ABS) Lending Indicators data revealed an increase in the value of new loan commitments for total housing of 1.5 per cent in February, which followed a drop of 3.9 per cent in January.

Kevin James, general manager, advisory and solutions at Equifax, said that the average limit per new mortgage account continued to grow “at a consistent pace of 7 per cent year on year – reflecting increasing house prices”.

“Additionally, we’ve seen higher mortgage stress this quarter despite stable interest rates; mortgage arrears increased across all categories,” James said.

“Arrears of 30–89 days past due increased 15 per cent year on year, while arrears of 90-plus days past due were up 17 per cent.”

Meanwhile, unsecured credit demand – made up of credit cards; personal loans; and buy now, pay later (BNPL) – fell 3.5 per cent, largely driven by declining demand in personal loans, which fell by 4.6 per cent and BNPL (down by 24.7 per cent).

However, credit card demand grew by 13.2 per cent when compared to the same quarter last year, despite the overall drop in demand for unsecured credit.

James stated that Australians are reaching out for unsecured credit to “alleviate cost-of-living pressures”.

“We’re also seeing strong growth in credit card limits, up 29 per cent year on year, which means consumers are applying for more money on their cards,” James added.

“While demand for personal loans has dropped, arrears in this portfolio are rising. In fact, personal loan arrears of more than 30 days past due have hit their highest point since 2020.

“And we expect this trend to continue – personal loan arrears tend to peak in Q2, as festive season spending becomes due. Taken together, these trends across credit cards and personal loans paint a picture of growing financial strain for consumers.”

[RELATED: New loan commitments rebound: ABS]