Credit demand down for everything but home loans in 2020

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on November 17, 2020
Credit demand down for everything but home loans in 2020

Photo by John Schnobrich on Unsplash

Consumer credit demand has plummeted overall, but demand for home loans remains strong, new data shows.

Equifax’s latest Quarterly Consumer Credit Demand Index for the September 2020 quarter shows a near 30% decline in demand for consumer credit compared to September 2019. 

The results show a decline in every category, except for home loans, which rose by 16.3% in the quarter compared to a year ago.

Thinking about refinancing to a low-rate, variable owner-occupier home loan? Below are a handful of low-rate loans in the market. 

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS
QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS

Variable Home Loan (Principal and Interest)

  • $5000 Cashback. T&Cs Apply.
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
NO ONGOING FEESFREE REDRAW FACILITY
  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.
NO ONGOING FEESFREE REDRAW FACILITY

Live-in Variable Loan (Principal and Interest) (LVR < 90%)

  • Rate Match Guarantee. Tic:Toc will match the rate on identical variable P&I home loans. T&C's Apply.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 29, 2022. View disclaimer.

According to Equifax's data, credit cards suffered the biggest drop of 39.5%, which is not unexpected given the well-publicised fall in credit card use over the pandemic months. 

Buy now, pay later, despite reported increases in customers by the likes of Afterpay and Zip, as well as some recent negative press about customers missing repayments, also saw a 13.2% annual decline. 

The final two categories - car loans and personal loans - fell by 15.3% and 32.3% respectively. 

The Credit Demand index by Equifax measures the volume of credit applications for credit cards, personal loans, Buy Now Pay Later (BNPL), and auto loans.

Mortgage demand includes loans for new properties as well as refinancing.

Eqfxdata

How each credit category performed in each state. Source: Equifax. 

Why did credit demand fall so much? 

Kevin James, General Manager Advisory and Solutions at Equifax, said government stimulus measures like JobKeeper and JobSeeker have reduced the need for Australians to rely on credit. 

"This is particularly evident when looking at the volume of personal loan applications, which have dropped by around 30% for two consecutive quarters," Mr James said.

"As government stimulus starts to pull back, we anticipate personal loans may experience a revival, particularly among sub-prime borrowers who may not be eligible for other kinds of financing.”

Mortgage demand and applications, on the other hand, increased in every single state, even Victoria, which saw a 1.3% annual increase (the smallest among the states) despite being in lockdown for weeks on end.

Mortgage applications rose by 16.3% on average, led by Western Australia at almost 50% (48.3%).

The ACT also recorded an impressive 31.6% spike, while NSW was up 14%.

According to Equifax, home buyer activity is expected to further strengthen over the next quarter provided the virus remains contained, and interest rates remain low, especially now that Victoria is moving out of stage-four restrictions.

"Historically, movements in Equifax mortgage application demand data has led movements in house prices by around six to nine months," it said.

See also: ANZ says House prices to rise 9% in 2021

EQU-home

Source: Equifax 

Victoria actually had the largest decrease among all categories except buy now, pay later, which fell by 24.8% in Tasmania.

For the first time in more than eight quarters, the drop in demand for such platforms extended across every Australian state and territory.

“Despite the subdued interest in Buy Now Pay Later, there have been some interesting movements across generations. In the September quarter, baby boomers had the lowest share of enquiries for BNPL but the highest rate of growth," Mr James said.

"Generation Z accounted for a quarter of all enquiries even though they only made up 5% of the working adult population.

"And digital-savvy Gen Y has shown the largest shrink of any generation."

In Victoria, auto loans declined by more than 42%, and there was less demand generally in the eastern states. 

In the market for a new car? The table below features car loans with some of the lowest fixed interest rates on the market.

Lender

FixedNew, Used99 yearsMore details
APPLY ONLINE
  • No ongoing fees
  • No early exit penalty
  • Flexible repayment options
APPLY ONLINE

Car Loan

  • No ongoing fees
  • No early exit penalty
  • Flexible repayment options
FixedNew2 yearsMore details
NO ONGOING FEES
  • No ongoing fees
  • No early exit penalty
  • Apply online
NO ONGOING FEES

New Car Loan

  • No ongoing fees
  • No early exit penalty
  • Apply online
FixedNew2 yearsMore details
QUICK APPLICATION PROCESS WITH NO FEES
  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
QUICK APPLICATION PROCESS WITH NO FEES

New Vehicle Fast Loan Low Rate

  • Quick application process and no monthly fees
  • Low fixed interest rates with terms of up to seven years
  • New car loans cover cars up to 3 years old
FixedNew1 yearMore details
No ongoing fees
  • Interest rates ranked in the best 20%
  • No ongoing fees
  • Can apply online
No ongoing fees

Plenti Car Loan

  • Interest rates ranked in the best 20%
  • No ongoing fees
  • Can apply online

Base criteria: fixed and secured car loans for 'low emission' cars. Rates based on a loan of $30,000 for a five-year loan term. Products sorted by advertised rate. Repayments are calculated based on advertised rates. *The Comparison rate is based on a $30,000 loan over 5 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 29, 2022. View disclaimer.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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