Credit demand remains soft as consumer re-financing activity hits new lows

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Auckland, April 22 2022: Quarterly Consumer Credit Demand Index: March Quarter 2022

  • Overall consumer credit applications reduced by -32.4 % (vs March qtr 2021)
  • Home loan applications reduced by -42.0% (vs March qtr 2021)
  • Unsecured credit applications down -32.3% (vs March qtr 2021)

According to the latest Quarterly Consumer Credit Demand Index, overall consumer enquiry volumes declined for the 3rd quarter in a row, with a year-on-year reduction of 32% for the quarter ending March 2022. However, consumer credit demand remains above the lows experienced during the Q2 2020 lockdown.

Released today by Equifax New Zealand, the global data, analytics and technology company and leading provider of credit information and analysis, the Credit Demand Index measures applications for retail credit products, including credit cards, personal loans, and home loans.

Consumer credit demand was down across all major retail credit portfolios, with the largest decline being for home loans as borrowers continued to pull back from a market that was at its peaks this time last year.

"With rising interest rates, CCCFA and other related lending constraints, home lending enquiries fell by 42% year-on-year for the March 2022 quarter. However, home loan enquiries for the quarter March 2022 were above quarterly volumes for 2019 and the first half of 2020". said Angus Luffman, Managing Director Equifax New Zealand.

The softening demand is also playing out in lower numbers of new retail credit accounts being opened, which continue to be near their lowest levels since the start of the pandemic.

Demand for credit is being significantly impacted by a sharp fall in consumers re-financing or moving their credit relationships. Consumers refinancing their loans is at its lowest level since the start of the pandemic and down ~80% on 2019 levels.

"The decline in refinancing activity commenced with the Delta outbreak and lockdown in August 2021, dropping to near March 2020 levels. The commencement of CCCFA changes saw a further acceleration in the decline of refinancing activity. Such a significant drop indicates consumers are holding onto their current relationships, rather than take the risk and effort of trying to get a better deal elsewhere," says Luffman.

Unsecured credit demand activity also declined, with the biggest impact being for credit card enquiries which fell by 36.2% year-on-year for the March 2022 quarter. Personal loan applications, by comparison, dropped by 29.7% for the same period.

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FOR MORE INFORMATION

Geoff Fairburn
Ph:+64 27 258 4886
e: Geoff.Fairburn@equifax.com

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The information in this release does not constitute legal, accounting, or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.