Veda has today released its Consumer Credit Demand Index results for the June quarter of 2013, which registered the biggest year-on-year rise in mortgage demand since June 2010 but weakening consumer credit demand.
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.
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Below is the media release:
The index, which measures the change in consumer credit demand for the June quarter compared to the same period in 2012, showed that overall demand increased by 3.9% over the past year, but is down from 4.7% in the March quarter.
Overall mortgage enquiries increased to 6.9% in the June quarter, accelerating from 1.9% in the March quarter and recording the largest increase since June 2010.
The volume of mortgage enquiries increased in all states, with the strongest results in WA (+15%), where they continue to strengthen despite the waning mining boom. NSW (+13%) also recorded a second consecutive quarter of growth, alongside the NT (+10.3%) and SA (+7.5%). Despite showing improvement in the June quarter, mortgage enquiries remain weak in VIC (+1.2%), QLD (+1.6%), Tasmania (-1.3%) and the ACT (-3.3%).
“Mortgage enquiries are a good indicator of home buyer demand, with movements in mortgage enquiries tending to lead movements in house prices six to nine months later. The increase in mortgage enquiries appears to suggest better housing market conditions, a good sign in light of the potential tests facing the Australian economy in the future,” said Angus Luffman, General Manager of Consumer Risk at Veda.
“The fact that the June quarter recorded the largest volume of mortgage enquiries in three years suggests that house price growth is likely to remain in positive territory in the near term, for those states and regions experiencing enquiry growth.”
In contrast to the growth in mortgage enquiries, personal loan applications eased from a notably high level of 10.3% in the March quarter to 6.3% in the June quarter. The growth in personal loan applications was led by the NT (+15.7%), SA (+10.5%) and VIC (+9.9%). The ACT (+8.0%), WA (+7.6%) and QLD (+5.9%) also recorded increases, while NSW (+2.9%) and Tasmania (-0.4%) had the weakest growth in personal loan applications over the quarter.
“Over the past year, consumer credit demand has been driven by surge in car sales, particularly in the second half of last year but this demand appears to be fading, which is being reflected in the slowing demand for consumer credit.
“The Veda consumer credit demand index has historically provided an early indication of movements in consumer spending and retail sales. The easing in personal loan applications suggests that are consumers reining in their spending due to concerns over the labour market and the fall in the Australian dollar raising the price of big items such as household appliances and imported cars.”
Credit card applications picked up slightly in the June quarter with growth of 1.3%, largely driven by a significant rise in card applications in the month of June. Over the quarter, the ACT (+6.5%), SA (+4.7%) and NSW (+4.2%) recorded the strongest increase. Western Australia (+1.3%) and Tasmania (0.7%) were closer to the national average, while QLD (-1.9%), VIC (-1.1%) and also the NT (-6.0%) were the weakest states.
It’s important to note that while mortgage demand is picking-up, the lift is from a low base, with the overall number of mortgage applications still low from an historical perspective (see next chart).
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.
