Late yesterday, Veda released its Consumer Credit Demand Index results for the March quarter of 2013, which registered the biggest year-on-year rise in overall consumer credit demand since the onset of the Global Financial Crisis (GFC), driven by strong growth in personal loan applications.
However, growth in the number of mortgage applications remained sluggish relative to past housing upturns, with solid growth in Western Australia, New South Wales, and South Australia mostly offset by weakening mortgage demand in the other states and terrirories.
According to regular commenter and mortgage broker Peter Fraser, Veda are the largest credit recording agency in Australia, and every application for any formal loan through any retail lender is recorded with them. As such, results published by Veda should be taken seriously.
Sydney, 9 May, 2013: Veda, Asia-Pacific’s leading provider of consumer and commercial data intelligence and insights today revealed the results of its consumer credit demand index for the first calendar quarter of 2013. The index, which measures the change in consumer credit demand for the March quarter compared to the same period in 2012, showed that overall demand increased by 4.7% over the past year, the strongest rate of annual growth since the GFC.
“On a quarterly basis, the rate of growth in the March quarter is maintaining the strength from the December 2012 quarter, with some positive underlying trends. It is encouraging to see that the increase in consumer credit demand for the March quarter is almost three times the average annual growth rate, which has been at +1.6% since the index began in 2003,” said Angus Luffman, General Manager of Consumer Risk at Veda.
Personal loan applications continued to drive the demand for consumer credit across the quarter, with consumers’ appetite for car loans being a primary factor. Growth in personal loans has been consistent in all states throughout the March quarter, being strongest in the NT (19.0%), ACT (+15.5%), VIC (+13.7%), SA (+11.5%) and WA (+10.2%), followed by NSW (+9.6%), TAS (+8.6%) and QLD (+7.5%).
Credit card applications were weak across all states, with falls recorded in QLD (-3.8%), SA (-3.7%), NT (-2.7%) and TAS (-9.2%), while VIC (+0.0%) was flat. The ACT (3.7%) WA (+0.9%) and NSW (0.1%) were the only states to show growth in credit card demand over the past year. The continued weakness in credit card demand is supported by RBA statistics which show that aggregate credit card balances are falling across the country, the first annual contraction in over 20 years.
“Veda’s consumer credit demand index has historically provided an early indication of movements in consumer spending and retail sales. Household goods retailing has been weak over the past year, but the recent strength in personal loan applications suggests that consumers have been willing to borrow for big-ticket items such as cars. That is also a good sign for household goods retailers who are expected to increasingly see the benefits of low interest rates and the high dollar keeping the prices of imported goods down,” said Luffman.
Overall mortgage enquiries increased by 1.8% in the March quarter, with an underlying trend that has now seen four consecutive months of increased mortgage application demand. This trend has been driven by strong improvements in NSW and continued strength in WA. While mortgage enquiries are now lifting, the current growth rate remains very weak relative to the growth seen in previous housing market upturns.
Mortgage enquiries were strongest in WA (+12.7%), followed by NSW (+5.1%) and SA (+3.7%). Mortgage enquiries decreased in TAS (-8.5%), QLD (-5.3%) and VIC (-1.1%), with the pace of decline in mortgage enquiries worsening in each of these states in the March quarter. There was also weakness in the ACT (-4.8%), while the growth in mortgage enquiries has levelled out in the NT (+0.7%) after a period of strength in late 2012.
“The good news is that mortgage enquiries are still lifting slowly, which indicates that the current upturn in house prices is likely to have further to run. House prices are being supported by low interest rates, improvements in affordability, and solid population growth,” said Luffman.
Veda’s data historically shows that mortgage enquiries are a good indicator of home buyer demand, and an excellent indicator of housing turnover, with movements in mortgage enquiries tending to lead movements in house prices by around six to nine months. Australian house prices have now returned to positive year-on-year growth, as foreshadowed by Veda mortgage enquiries.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
