Demand for loans ticks up, indicating potential upturn in housing market, Equifax says

Demand for loans is increasing, and credit agency Equifax says it may signal a turnaround for the property market.

It has released data showing that after seven consecutive quarters of decline, consumer credit demand increased in the June quarter.

Unsecured credit demand was up 15.1% year-on-year, driven by 16% growth in credit card demand and a 14.5% increase in applications for personal loans. Mortgage demand was down slightly, with a drop of 1.7% but that was less of a year-on-year drop than had been recoded in previous quarters.

The increase in demand for unsecured lending was particularly notable in people aged 30 and over.

“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,” Equifax New Zealand managing director Angus Luffman said.

Regions with strong credit card demand in the quarter included Otago and Taranaki, up 24.3%$, Gisborne up 22.7%, and Canterbury, Hawke’s Bay and Tasman up 21%. Personal loan applications were up 24.6% in Otago and 17.3% in Southland.

Luffman said these were usually used to fund bigger ticket items such as cars and home improvement. The July 1 deadline for the Clean Car Discount scheme could have driven people to buy in the quarter, he said.

Demand for mortgages increased year-on-year in Marlborough, West Coast, Otago and Taranaki.

“Mortgage demand, measured by credit inquiries, is a lead indicator of housing turnover and, in turn, price movements. 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.

“We had a massive boom of that in late 2020 and the first part of 2021 and that’s come well off, now it’s more equalising.”

He said demand for unsecured credit was still well below pre-pandemic levels.

The data reflected credit applications rather than loans approved.

There was clear momentum in credit card lending and mortgages, he said. “Personal loans really jumped up his quarter. How much of that is driven by the Clean Car rebates we will have to see.”