iscover
iscover 
The latest Equifax Quarterly Consumer Credit Insights – September 2024 has shown that secured credit demand (derived from mortgages and auto loans) rose by 2.3 per cent in 3Q24 when compared to the same quarter in 2023.
The September quarter 2024 marked the first quarter of positive growth in mortgage demand since 2021, rising by 2.9 per cent year on year, while auto loan demand only declined slightly by 0.1 per cent during the same period.
Meanwhile, unsecured credit demand (credit cards, personal loans, and BNPL) fell in the September quarter by 1.9 per cent year on year, with the growth in personal loans and credit cards in particular beginning to ease, falling by 6.7 per cent and slowing to 4.8 per cent, respectively.
Along with this, BNPL demand also fell by 2.8 per cent.
General manager, advisory and solutions at Equifax, Kevin James, said the rise in mortgage demand has suggested “consumer confidence is improving, driven by the expectation that an interest rate cut is on the mid-term horizon”.
“This new-found optimism isn’t evenly distributed, however, with the extended period of higher interest rates having a disproportionate impact on consumers nationwide,” James said.
According to Equifax’s analysis, mortgages originated around mid-2023 and onwards have revealed heightened signs of stress much earlier than mortgages that were on the books before 3Q23.
This has indicated that new borrowers struggled more with honouring repayments along with juggling cost-of-living constraints on household budgets.
James said: “Mortgage stress is particularly acute for those coming off the mortgage cliff, especially in Victoria, where mortgage holders are 20 per cent more likely to be in arrears than the national average.
“Young people aged 18–30 and owner-occupiers are most likely to be struggling, with these groups showing higher levels of mortgage stress.”
Additionally, a 5 per cent decline in mortgage approvals in the first half of 2024 when compared to the year prior has been observed as a result of banks introducing more stringent lending criteria in response to market conditions.
“A contraction in mortgage conversion rates is a lagging indicator – meaning that we’re only now seeing the impact of lenders’ more stringent borrowing eligibility criteria,” James said.
“In reality, this criteria would have been implemented around 12 months in response to higher inflation pressures and affordability concerns, to prevent a spike in mortgage arrears.
“The risk here is that such tight lending criteria, along with the ongoing use of a 3 per cent serviceability buffer while we’re at the top of the interest rate cycle, could financially exclude some segments of the population.”
James further said that Australians reducing their reliance on unsecured credit has suggested that they’re adjusting to the challenging economic climate.
“The reduction in consumer stress can also be seen in arrears, which decreased compared to last quarter across all product types. That said, consumers aren’t entirely out of the woods – mortgage and personal loans arrears of 90-plus days past due have edged up compared to last year,” James said.
[RELATED: Over 1/4 of brokers hit by scams in last 12 months]
ISCOVER 
