Credit card and personal loan demand rises as consumers manage changing household budgets

Equifax Quarterly Consumer Credit Insights: September 2023

• Unsecured consumer credit applications declined (-2.8% vs September quarter 2022)
  • Credit card applications grew (+6.9% vs September quarter 2022)
  • Personal loan applications increased (+8.2% vs September quarter 2022)
  • Buy now pay later applications declined (-27.0% vs September quarter 2022)
• Secured consumer credit applications declined (-3.9% vs September quarter 2022)
  • Mortgage applications down (-5.0% vs September quarter 2022)
  • Auto loan applications grew (+1.1% vs September quarter 2022)

SYDNEY – November 2023 – Consumer demand for credit cards and personal loans is on the rise, while arrears continue to climb across multiple product types, according to the latest Equifax Quarterly Consumer Credit Insights - September 2023.

Released today by Equifax, the global data, analytics and technology company and leading provider of credit information and analysis in Australia and New Zealand, the Index measures the volume of credit applications for credit cards, personal loans, buy now pay later (BNPL), mortgages and auto loans.

Unsecured credit demand, comprising credit cards, personal loans and buy now pay later, decreased -2.8% in the September quarter; an improvement the June quarter, when unsecured credit demand fell -8% year-on-year. This slower rate of decline was driven by ongoing growth in credit card demand, up +6.9% in Q2 2023 versus the same period 2022, and a resurgence in personal loan applications (+8.2%). BNPL was the only unsecured credit type to show a decline in Q3 (-27.0%).

Kevin James, General Manager Advisory and Solutions, Equifax, said: “Cost of living pressures are impacting household budgets, with consumers using unsecured credit to help them manage expenses. This quarter we’ve seen a turnaround in demand for personal loans, which suggests that consumers are trying to consolidate their debts and keep their finances under control. However, using unsecured credit to make ends meet is not a viable long-term strategy for consumers who are feeling financial strain and can create bad debt cycles if they can't keep up with repayments.

“We’re also seeing arrears continue to rise across multiple portfolios. Late delinquency rates for credit cards are at their highest since 2021, with the number of accounts in 90+ days past due arrears up 19% year-on-year. According to our data, the squeeze on household budgets is hitting consumers aged 31-40 the hardest - this cohort had a higher percentage of accounts in late arrears in August than the national average for Q3,” Mr James said.

Secured credit demand, derived from mortgages and auto loans, decreased -3.9% in Q3 2023 compared to the same period in 2022. Overall mortgage demand fell -5.0% compared to the same period in 2022; however, relief from inflation and stagnant cash rates meant relatively stable mortgage demand over the last 3 months. Auto loan demand grew +1.1% in Q3 2023 vs the same quarter last year. 

“After multiple quarters of declining demand, auto loans saw positive growth for the first time since the pandemic. This positive growth was supported by easing supply chain pressures.

“For mortgages, acceleration in early delinquency continues from last quarter. The number of accounts in arrears 30-90 days past due is 47% higher than 12 months ago,” Mr James said.

IMAGE 1: Consumer Macro Credit Demand – Quarterly YOY

Source: Equifax

IMAGE 2: Consumer Credit Applications – By Type (Indexed to Nov 2019)

Source: Equifax

^The data has been re-indexed from 2018 to account for the recent inclusion of Buy Now Pay Later applications:
Re-indexed data to commence in 2018 (previously 2015)
Added buy now pay later and auto loan credit enquiries as a separate trendline (previously rolled up into personal loans)

ABOUT EQUIFAX INC.
At Equifax (NYSE: EFX), we believe knowledge drives progress. As a global data, analytics, and technology company, we play an essential role in the global economy by helping financial institutions, companies, employers, and government agencies make critical decisions with greater confidence. Our unique blend of differentiated data, analytics, and cloud technology drives insights to power decisions to move people forward. Headquartered in Atlanta and supported by more than 14,000 employees worldwide, Equifax operates or has investments in 24 countries in North America, Central and South America, Europe, and the Asia Pacific region. For more information, visit www.equifax.com.au or follow the company’s news on LinkedIn.

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NOTE TO EDITORS
The Quarterly Consumer Credit Insights  by Equifax measures the volume of credit card, personal loan applications, Buy Now Pay Later, mortgages and auto loan applications that go through the Equifax Consumer Credit Bureau by financial services credit providers in Australia. Credit applications represent an intention by consumers to acquire credit and in turn spend; therefore,