Mortgage applications up 23.5% in March quarter: Equifax

According to the data analytics and credit reporting company, while applications for personal consumer credit (credit cards and personal loans) have continued to drop, demand for mortgages, car loans and buy now, pay later (BNPL) applications are growing rapidly year-on-year.

After reviewing the number of mortgage applications from financial services credit providers across Australia, Equifax found that demand for home loans were up 23.5 per cent compared with the March quarter 2020, with every state and territory experiencing growth. 

While Northern Territory led demand with an increase of 50.5 per cent, Equifax noted that volumes were low in the state overall.

Following NT, Western Australia was the state which had the highest increase in the mortgage applications (when compared with the quarter ending March 2020), at 48.6 per cent.

This was followed by Queensland (33.4 per cent), ACT (31.5 per cent) and SA (25.9 per cent).

The eastern seaboard states continued to see an acceleration in home buyer activity, with Victoria showing a bounce back from a subdued previous quarter in lockdown.

NSW applications were up 24.5 per cent, Tasmania was up 18.4 per cent, while Victoria increased by 15.2 per cent. 

Kevin James, Equifax’s general manager, advisory and solutions, commented: “Ultra-low interest rates are enticing more people into the market, but also an incentive for home owners to refinance in the quest to find a better rate.”

He added: “The market is showing a shift to asset-based lending, with mortgages and auto loans proving more popular than liabilities like credit cards and personal loans.”

The comments come as Equifax releases its Quarterly Consumer Credit Demand Index for March 2021, which measures the volume of applications for credit cards, personal loans, BNPL and auto loan applications that go through the Equifax Consumer Credit Bureau by financial services credit providers in Australia.

According to the index, overall consumer credit applications were down by around 14.0 per cent when compared with the same quarter last year.

The drop was led by a 28.9 per cent drop in credit card applications, while personal loan applications fell by 14.5 per cent.

The data company noted that while the drop in demand for credit card and personal loans had “softened”, it was “not enough to blunt their downward trajectory”.

Indeed, the company revealed that the drop equated to the 12th consecutive quarter in which credit card applications declined (or every quarter for the past four years), and the seventh consecutive quarter in which personal loan applications had fallen (or every quarter in the past 2.3 years). 

Victoria recorded the lowest demand for credit cards, falling by 30.9 per cent on last year, while the ACT had fewer personal loan applications (down 25.4 per cent on last year) than anywhere in Australia. 

However, while credit cards and personal loan demand remains soft, car loans and BNPL applications continue to grow. 

The Equifax index found there was a rise in both auto loan applications (+3.7 per cent) and BNPL applications (+4.0 per cent) in the March quarter when compared with the same period last year.

For auto loans, NT led the pack with a 23.4 per cent increase (but for a small volume of applications), while applications in WA rose by the second highest amount (11. 4 per cent).

The NT also saw the largest increase in BNPL applications, up 123.5 per cent on last year, but this again only accounted for a small volume of applications. NSW saw BNPL applications grow 7 per cent when compared with the March 2020 quarter, coming in second.

Victoria and Tasmania were the only states not to show growth in BNPL applications, but their volume of applications were still up on the last quarter.

“Despite signs that the market may be moving towards post-COVID recovery, credit card demand continues to decline. The reduced economic activity in Victoria from their second lockdown didn’t help, but ultimately a change in consumer behaviour is pushing credit cards out of favour,” Mr James said.  

“Demand for BNPL continues to come from Generation Y and Generation Z, but there are signs this cohort may have reached saturation. The younger generation – Generation Z – may soon catch up as they accounted for 26 per cent of total applications. 

“The lowest share remains with the Baby Boomer generation, not unsurprisingly since many are in retirement,” he added. 

[Related: House prices reached record high in March quarter]