Credit demand flat in spite of RBA rate cuts and Government assistance (CCDI April to June 2012)
Veda’s Quarterly Consumer Credit Demand Index: April to June 2012
Sydney, Australia, July, 2012: The results of Veda’s Consumer Credit Demand Index for the second quarter of 2012 show that overall consumer credit demand has flattened (+0.1%), but this is an improvement from more severe weakness seen in the March quarter (-4.4%). Veda is Asia Pacific’s leading provider of consumer and commercial data intelligence and insights.
Overall consumer credit demand fell slightly in the June quarter, and was flat over the financial year ended 30 June. The June quarter result was driven by a drop in credit card applications, partially offset by a small rise in personal loan applications.
Personal loan applications, in comparison to last year’s June quarter, showed modest to no change over the year in NSW (+1.5%), VIC (+1.4%), QLD (-0.4%), SA (-0.7%) and TAS (0.0%). However, personal loan applications continue to show solid growth in the mining states NT (+5.1%), and WA (+6.7%). Personal loan applications have edged ahead of credit card applications while the out-performance of personal loans relative to credit cards is being seen right across age groups.
Auto loan applications saw a notable increase in June quarter up +16% year on year, and the highest recorded number of applications since 2007. This is consistent with recent data from the Federal Chamber of Automotive Industries (FCAI) which showed June 2012 to be the best month on record for vehicle sales.
Credit card applications remain soft in all states. Over the past year, credit card applications have risen in only in ACT (+3.1%), WA (+1.3%), and VIC (+0.7%). Weakness is evident in NSW (-2.5%), QLD (-2.6%), and SA (-0.8%) with TAS (-8.2%) continuing to see a sharp decline in credit card applications over the past year.
“Whilst the Credit Demand Index was relatively flat for the quarter, consumer credit demand showed some real strength from the middle of May through to the end of the quarter. This strength coincided with the RBA rate cuts and the recent pre June 30 family assistance payments.” says Angus Luffman, head of consumer risk at Veda.
Mortgage enquiries were up (+0.7%) for the quarter building on the small rise (+0.2%) seen in the March quarter. Whilst still at historically low levels, the last two quarters results confirm that mortgage enquiries are stabilising.
The data shows mortgage enquiries continued positive growth for the quarter in WA (+5.6%), QLD (+3.5%) and the NT (+3.6%). Mortgage enquiries have remained broadly flat for the quarter over the past year in NSW, VIC and SA.
“Mortgage enquiries are a good lead indicator of housing demand. This stabilisation in mortgage enquiries suggests housing turnover is also stabilising. Lower interest rates and an improving housing affordability index align with the observed stabilisation in enquiries, after many quarters decline.” Luffman added.
The RBA’s cuts in May and June appear to have helped lift consumer sentiment close to a neutral level. However, fears about the global and domestic economic situation, in addition to share market declines and labour market uncertainty means that consumers remain cautious about credit.
Luffman continues: “Household assistance payments and similar stimulus from Government are known to support consumer spending but invariably also lead to an increase in credit demand in the near term. We are already seeing some effect from this household stimulus in the June numbers with an 8.7% lift in credit card enquiries and 9.8% increase in personal loan enquiries compared to May, and a 6.6% increase in personal loan enquiries compared to June 2011.