An overall increase in consumer credit for December 2021 – up 4.7% – was driven by personal loans while demand for BNPL eased, according to new data.
Global data, analytics and technology firm Equifax revealed consumer credit demand rose 4.7% in the fourth quarter of 2021, compared to the same period a year earlier, but declined. compared to the previous quarter.
Factors such as supply chain issues and the ongoing pandemic have impacted consumer spending, with Equifax’s quarterly Consumer Credit Demand Index (December 2021) reporting that consumer credit demand fell 18% from pre-COVID numbers in Q4 2019.
Overall growth in the past year has been fueled by an increase in personal loans – up 23% – which marked the strongest year-over-year growth in the past four quarters as demand returned to pre-COVID levels.
The latest data mirrors that of non-banking group Latitude, which has seen personal loan volumes increase by more than 40 % in 2021.
Demand for mortgages also remained strong, up 9% for the December 2021 quarter compared to the same quarter a year earlier.
Every state or territory saw an increase in demand for mortgages except Western Australia (which fell 1.1% from the prior year quarter).
Demand for mortgages in the Northern Territory rose 14.2% in Q4 2021, followed by Queensland (up 13.6%), ACT rose 12.2%, with NSW just behind at 10.7% and Victoria (up 8.8%). compared to the previous year.
Compared to pre-COVID levels (Q4 2019), demand for mortgages has increased by almost 30%, with 62% of applications in 2021 coming from consumers with high credit scores between 900 and 1,100.
Commenting on the results, Equifax’s general manager of advice and solutions, Kevin James, said the increase in applications from people with high credit scores had increased since 2018, which was a trend that reflected a housing market. “dominated by investors” and was expected to “continue until 2022”.
Demand for BNPL and credit cards has eased
Credit card demand fell by 6.3%, while BNPL remained relatively stable (0.9%) during the fourth quarter of 2021, compared to the same quarter of the previous year.
NSW saw the largest drop in demand for credit cards (down 9.5%), followed closely by the ACT (down 9.4%), while Tasmania was the only state or territory to record an increase in demand for credit cards (up 3.6%).
The report found that the slowdown was a reflection of reduced consumer confidence during the recovery period of the delta variant and the start of the omicron.
While the overall BNPL improved slightly in the fourth quarter of 2021 (up 0.9%), demand in the ACT increased by 49%, followed by 27% in the Northern Territories compared to the last year.
NSW was the only state to experience a drop in demand (down 7.9% from Q4 2020).
Compared to the previous quarter of 2021, demand for BNPL fell sharply, with claims falling by 31.4%.
Falling 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 major banks and traditional financiers enter the market with their own products,” said Mr. James.
“Members of older demographic groups, who might appreciate the convenience of BNPL but are hesitant to engage with new providers, may be more willing to engage with a BNPL option from an established financial institution.”
The easing in consumer credit demand in Q4 2021 reflects Australia’s uneven COVID recovery as a number of industries were left vulnerable to omicron.
“Workers in industries such as tourism and hospitality [were] particularly affected by the ‘phantom lockdowns’ experienced in several states,” Mr James said.
“The surge in cases around the holiday season – typically a time of higher spending – meant consumers were hesitant to spend on traditional holiday activities like travel and entertainment.”
Business Credit Application
During the same period, the demand for business credit applications increased by 9.7%, due to an increase in business loan applications which experienced a third consecutive quarter of growth.
In particular, business lending in the accommodation and food service sector experienced a “significant” increase, up 33% compared to the fourth quarter of 2020while the retail sector also saw an 18% increase in demand for business loans over the same period.