Consumer Credit Demand Declines Despite Ongoing Appetite For Credit Cards

Credit trends suggests a dip in consumer sentiment

Equifax New Zealand Quarterly Consumer Credit Demand Index: March 2023

• Overall consumer credit applications reduced by -6.2% (vs March quarter 2022)
  • Unsecured credit applications (comprising personal loans and credit cards) up +0.7% (vs March quarter 2022)
  • Mortgage applications reduced by -19.6% (vs March quarter 2022)

AUCKLAND: 17 April 2023 – Consumer credit demand declined in the March quarter of 2023, reaching its lowest point since the initial COVID lockdown in 2020, according to the latest Equifax Quarterly Consumer Credit Demand Index (March 2023).

Released today by Equifax New Zealand, the global data, analytics and technology company and leading provider of credit information and analysis, the index measures the volume of applications for retail products, including credit cards, personal loans, and home loans.

Unsecured credit demand eased, up just +0.7% year-on-year for the March quarter. This is being supported by ongoing growth in credit card demand (up +18.7% vs the same period 2022), but tempered by a decrease in personal loan demand (down -10.8% vs the same period 2022). Mortgage demand continues to fall, down -19.6% in the March 2023 quarter versus the same quarter 2022.

Equifax Managing Director Angus Luffman says the decline in overall credit demand is a key indicator of changing consumer sentiment. “The decrease in overall credit demand comes after a period of stabilisation over 2022, and suggests consumers are concerned about taking on new spending commitments in such an uncertain and increasingly expensive environment,” says Luffman.

The decrease in overall credit demand was seen across the regions in Q1.

“Recent severe weather events have impacted credit demand, particularly on the east coast. Gisborne experienced the largest decrease in overall credit demand in the March 2023 quarter, down -14.8% year-on-year, followed by Nelson (-11.7%) and Manawatu/Whanganui (-11.3%).

“Personal loan demand also declined across all regions in Q1, with Gisborne again recording the largest decrease (down -22.5%). Credit cards were the only portfolio to experience growth this quarter, continuing to improve after being impacted by the CCCFA changes. The greatest increases in demand were seen in Taranaki (+30.0%), Auckland (+23.2) and the West Coast (+22.9%),” says Luffman.

Mortgage demand fell for the seventh consecutive quarter, down by -19.6% year-on-year, and is now at the lowest point since the Index began in 2019. The largest declines were recorded in Nelson (-29.5%), Gisborne (-26.2%) and Hawke’s Bay (-23.9%).

“Mortgage demand, measured by credit enquiries for the products, is a lead indicator of housing turnover and, in turn, price movements. Whilst the decline in demand has slowed in Q1 2023, our data indicates that the softer housing market conditions will continue well into the second half of the year,” adds Luffman.

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