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Staff Reporter
Demand for credit eased in the June quarter, although it remained higher than at the same time last year, data released this week showed.
Veda’s quarterly Consumer Credit Demand Index (CDI) revealed that consumer credit demand dropped 5.1 per cent since March 2011 but increased 2.8 per cent year-on-year in the April-June quarter.
“The April-to-June quarter closes out what has been a very soft financial year for credit demand,” said Angus Luffman, head of consumer risk at Veda. “The data in the final quarter reveals some positive trends in certain types of consumer credit, but overall credit demand remains soft and is still behind on pre-GFC levels.”
Veda, a credit reporting agency, said applications for mortgages decreased 10.8 per cent in the June 2011 quarter compared to the same time last year, posting their sixth consecutive quarterly decrease. It said the current June quarter saw the lowest rate of decline out of the past six quarters, recording a 6.3 per cent increase since March 2011.
All states recorded year-on-year decreases in mortgage demand. Of the major states, Queensland recorded the sharpest decline of -18.4 per cent, followed by WA, -11.7 per cent and VIC, -11.4 per cent. NSW recorded the smallest decline amongst all states, down -5.0 per cent. In contrast, quarterly performance results show all states except Tasmania recorded gains on the March 2011 quarter, with NSW leading at 7.7 per cent.
“The contrast in the yearly and quarterly performance results suggests there is a leveling in mortgage demand, as year-on-year declines are beginning to slow and quarter-on-quarter results show signs of growth”, said Mr Luffman.
Veda said credit cards continue to record weak growth, falling sharply from the previous March quarter to -8.9 per cent. Year-on-year performance saw credit card demand post its second consecutive decrease of 1.2 per cent.
“The drop in credit card demand appears to be offset by a rise in consumer demand for debit cards,” said Mr Luffman. “Other factors potentially contributing to the patchy growth in credit cards include: the impact of the new responsible lending laws on banks conversion rates; and the continuing ‘save not spend’ focus of consumers.”
Demand for personal loans bucked the trend, recording its third straight quarterly increase year-on-year after 11 consecutive decreases dating back to the March quarter of 2008. Personal loans increased 6.9 per cent since June 2010 but were down marginally by -1.1 per cent on the previous quarter.
“Over the life of the Credit Demand Index, personal loans have been a lead indicator in overall consumer credit demand. Signs of continued, renewed growth across all states will be a trend to watch in the near term”, said Mr Luffman.
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