Global data, analytics and technology company Equifax has revealed consumer credit demand increased 4.7 per cent in Q4 2021, compared to the same period the previous year, but eased compared to the previous quarter.
Factors such as supply-chain issues and the ongoing pandemic impacted consumer spending, with the Equifax Quarterly Consumer Credit Demand Index (December 2021) reporting demand in consumer credit dropped 18 per cent when compared to pre-COVID figures at Q4 2019.
The overall growth in the past year was fueled by an increase in personal loans – up 23 per cent – which marked the highest year-on-year growth in the past four quarters, with demand edging back towards pre-COVID levels.
The latest data reflects those of non-bank Latitude Group, which saw personal loan volumes surge by more than 40 per cent in 2021.
Mortgage demand also continued to remain strong, up 9 per cent for the December quarter 2021 compared to the same quarter the previous year.
Every state or territory saw an increase in mortgage demand, except for Western Australia (which fell 1.1 per cent compared with the previous year’s quarter).
Mortgage demand in the Northern Territory rose 14.2 per cent in Q4 2021, followed by Queensland (up 13.6 per cent), the ACT increased 12.2 per cent, with NSW close behind at 10.7 per cent, and Victoria (was up 8.8 per cent), when compared with the previous year.
When compared to the pre-COVID levels (Q4 2019), mortgage demand was up almost 30 per cent, with 62 per cent of inquiries in 2021 coming from consumers with high credit scores of between 900 to 1100.
Commenting on the results, general manager advisory and solutions at Equifax, Kevin James, said the increase in inquiries from people with high credit scores had been growing since 2018, which was a trend that reflected a property market “dominated by investors” and was expected to “continue into 2022”.
BNPL and credit card demand eased
Demand for credit cards dropped by 6.3 per cent, while BNPL remained relatively flat (0.9 per cent) during Q4 2021, when compared to the same quarter the previous year.
NSW recorded the largest decline in credit card demand (down 9.5 per cent), followed closely by the ACT (down 9.4), while Tasmania was the only state or territory to record an increase in credit card demand (up 3.6 per cent).
The report found the downturn was a reflection of reduced consumer confidence during the delta variant recovery period and the onset of omicron.
While overall BNPL improved marginally in Q4 2021, (up 0.9 per cent), demand in the ACT was up 49 per cent, followed by 27 per cent in the NT compared with the previous year.
NSW was the only state to experience a decrease in demand (down 7.9 per cent compared to Q4 2020).
When compared with the previous quarter 2021, demand for BNPL took a steep drop with applications falling 31.4 per cent.
The drop in demand for BNPL suggests the market is entering a more mature state, Mr James said.
“However, we expect to see another phase of growth for BNPL as the big banks and traditional financiers enter the market with their own products,” Mr James said.
“Members of older demographics, who might appreciate the convenience of BNPL but are reluctant to engage with newer providers, may be more willing to engage with a BNPL option from an established financial institution.”
The easing of consumer credit demand in Q4 2021 is reflective of Australia’s uneven COVID recovery as a number of industries were left vulnerable in the face of omicron.
“Workers in industries such as tourism and hospitality [were] particularly hard hit by the ‘shadow lockdowns’ experienced in several states,” Mr James said.
“The spike in cases around the festive period – usually a time of higher spending – meant consumers were wary of spending on traditional holiday activities like travelling and entertaining.”
Business credit demand
In the same reporting period, demand for business credit applications grew by 9.7 per cent that was driven by a rise in business loan applications that saw a third straight quarter of growth.
In particular, business loans in the accommodation and food services sector saw a “significant” rise, up 33 per cent on Q4 2020, while the retail trade sector also saw a rise in demand for business loans up 18 per cent, compared during the same period.