Mortgage demand drops amid credit score pressure

Mortgage demand fell by 4.5% within the March quarter of 2024 in comparison with the earlier 12 months, but challenges persist as each the common limits and arrears on these loans proceed to extend, in accordance with Equifax.

“Over the previous 12 months, refinancing has been a key driver of mortgage demand as shoppers who had been reaching the tip of their fixed-rate interval sought out higher offers,” mentioned Kevin James (pictured above), normal supervisor advisory and options at Equifax. “Many of those mortgage holders have now refinanced and this demand has dropped off.”

The newest Equifax Quarterly Shopper Credit score Insights confirmed that in Q1 2024, secured credit score demand, primarily from mortgages and auto loans, decreased by 2.8% in comparison with the identical interval in 2023.

Ongoing mortgage stress

The Equifax report, which measures the amount of credit score functions for bank cards, private loans, purchase now pay later (BNPL), mortgages, and auto loans, additionally discovered that regardless of secure rates of interest, mortgage stress is intensifying.

“Whereas mortgage demand has declined, the common restrict per new mortgage account continued to develop at a constant tempo of seven% year-on-year – reflecting growing home costs,” James mentioned.

“Moreover, we’ve seen increased mortgage stress this quarter regardless of secure rates of interest; mortgage arrears elevated throughout all classes. Arrears of 30-89 days overdue elevated 15% year-on-year, whereas arrears of 90+ days overdue had been up 17%.”

Credit score vehicles buck the development

Whereas general unsecured credit score demand noticed a decline of three.5%, demand for bank cards surged by 13.2% in comparison with the identical interval final 12 months. The rise contrasts sharply with the declines seen in private loans (-4.6%) and BNPL companies (-24.7%).

“We’ve seen a major uplift in bank card demand, with many Australians reaching out for unsecured credit score to alleviate price of residing pressures,” James mentioned. “We’re additionally seeing sturdy development in bank card limits, up 29% year-on-year, which suggests shoppers are making use of for more cash on their playing cards.”

Rising arrears signaling elevated monetary pressure

The monetary pressure on shoppers is clear not solely within the demand for increased bank card limits but in addition within the rising arrears throughout varied credit score varieties. Private mortgage arrears have reached their highest level since 2020 and are anticipated to peak within the second quarter as vacation expenditures develop into due.

“Whereas demand for private loans has dropped, arrears on this portfolio are rising,” James mentioned. “The truth is, private mortgage arrears of greater than 30 days overdue have hit their highest level since 2020. And we anticipate this development to proceed – private mortgage arrears are inclined to peak in Q2, as festive season spending turns into due.”

To check the most recent figures with the earlier outcomes, click on right here.

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