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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 | |||||||||||||
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Variable | More details | ||||||||||||
FEATUREDUNLIMITED REDRAWSSPECIAL OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Variable | More details | ||||||||||||
FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Variable | More details | ||||||||||||
QLD/NSW/VIC/SA METRO & INNER REGIONAL AREAS | Variable Home Loan (Principal and Interest)
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Variable Home Loan (Principal and Interest)
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Variable | More details | ||||||||||||
REFINANCE ONLY | Variable Rate Home Loan – Refinance Only
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Variable Rate Home Loan – Refinance Only
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Variable | More details | ||||||||||||
NO ONGOING FEESFREE REDRAW FACILITY | Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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- 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%
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.
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
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 | |||||||||||||
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Fixed | New, Used | 99 years | More details | ||||||||||
FEATUREDAPPLY ONLINE | Car Loan
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Car Loan
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Fixed | New | 2 years | More details | ||||||||||
NO ONGOING FEES | New Car Loan
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New Car Loan
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Fixed | New | 2 years | More details | ||||||||||
QUICK APPLICATION PROCESS WITH NO FEES | New Vehicle Fast Loan Low Rate
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New Vehicle Fast Loan Low Rate
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Fixed | New | 1 year | More details | ||||||||||
No ongoing fees | Plenti Car Loan
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Plenti Car Loan
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- Unlimited extra repayments
- Flexible repayment options
- Can apply online
- You could win a $1,000 fuel gift voucher. Open to customers who settle a car loan with loans.com.au. Terms and conditions apply.
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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