Credit demand rise fueled by overseas travel, car finance

Demand for credit has risen for the first time in two years as consumers seek sign up for credit cards and personal loans, according to a new report from financial services company Equifax.

Its quarterly report shows a 5.3 percent rise in credit applications in the three months ended June, the first rise since the same quarter 2021, and up 15.1 percent on a year ago.

The biggest rise was in demand for credit cards and personal loans, while mortgage finance remained subdued.

Equifax’s New Zealand managing director Angus Luffman saw the rise in overall credit demand as a positive sign.

“After seven quarters of decline, we have seen an upward shift in consumer credit demand. This increase is driven by demand for unsecured credit, particularly from applicants 30 years and older.”

“The rise in demand is a continuation of the stronger appetite for credit card products seen in recent quarters. More demand from the older age groups is indicative of the return of international travel,” Luffman said.

The strongest growth in demand was in the regions, with rises for credit cards and personal loans rising more than 20 percent in Otago, and double digit growth for cards in Taranaki, Gisborne, Hawke’s Bay and Canterbury, with Southland, Auckland and the West Coast showing 15-17 percent growth in personal loans.

Luffman put the demand for personal loans, in part, down to demand for car finance ahead of the reduced clean car rebates.

“Personal loans are often used to fund bigger ticket items such as cars, equipment and home improvement… Despite the growth in recent quarters, unsecured credit demand remains well below pre-pandemic levels.”

Mortgage demand continued to fall albeit at a slower rate, falling 1.7 percent on a year ago, although regionally it was mixed with large decline sin Nelson, Gisborne and Hawke’s Bay, but rises in Marlborough, West Coast, Otago and Taranaki.

“Whilst still in negative territory, demand for mortgages has continued to stabilise after the significant double digit declines seen over the last 12 months. Mortgage demand has improved to being broadly in line with pre-pandemic levels, a positive sign as we head into the remainder of the year,” Luffman said.