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Veda Advantage says credit enquiries enjoy first bump since 2008, but mortgage applications still in freefall


Applications for credit card and personal loans in Australia showed a same-quarter growth of 2.5% in the final quarter of 2010, according to report by Veda Advantage. It was the first year-on-year quarterly growth since the first period of 2008.

The credit push, however, couldn’t counterbalance a continuing freefall in mortage applications. Mortgage enquiries fell 16% in the fourth quarter, reaching their lowest point in eight years.

The Veda Advantage report, released 31 January, showed that personal loan enquiries rose 2% year-on-year during the December quarter, the first sign of growth after 11 consecutive decreases since the first quarter of 2008. This latest rise comes after a 2.2% year-on-year fall in personal loan applications in third quarter 2010.

Broken down by state, the largest growth in personal loan applications in fourth quarter 2010 came from New South Wales (4.4%) and Western Australia (4.3%).

Angus Luffman, head of consumer risk at Veda Advantage, said the report shows consumer confidence is stabilising. “With credit card applications increasing by 2.9% in the December quarter, the traditional Christmas trading season, we are seeing some positive growth in unsecured credit,” he said.

Consumer demand for credit cards maintained its upward trend, rising 2.9% and following a third quarter increase of 3.6%.

Luffman said the lift in unsecured credit was tempered by the drop in mortgage applications, now below levels seen in the middle of the GFC.

The 16% fall in the fourth quarter was actually an improvement over the third quarter, which saw a drop of 23.6%.

“Mortgage applications over the past two years appear to have been demonstrably impacted by the GFC — declining in late 2008 and then strengthening in 2009 during the government stimulus before winding back in 2010,” Luffman said. “Overall, mortgage demand fell by more than 19% on average across the 2010 calendar year.”

Luffman said it will be interesting to see what effect new consumer credit regulations that came into effect on 1 January will have on credit demand. Mortgage brokers, credit providers and finance companies now have to prove they have taken all reasonable steps to establish the consumer has the capacity to repay their loan and meet financial objectives. The companies also are required to prove the loan will not put the consumer in a position of substantial financial hardship.