Recent data has shown that Australian credit card debt is at an eight-year low, raising consumers' capacity to spend and putting more potential borrowers within the range of serviceability for securing a home loan.
In January, ASIC implemented credit card reforms that reduced the limits customers could get on a new credit card and sought to raise awareness that credit cards are a poor source of mid- to long-term debt.
Stuart Stoyan, founder and CEO of specialist lender MoneyPlace, said that ASIC’s changes amplified the natural decline of demand for credit cards as people begin to realise the number of options available that better meet their needs.
“What we’ve seen is ASIC’s reform, combined with the broader efforts to educate Australians about credit card debt, leading to changing behaviours,” he explained.
According to APRA, loans by banks to households via credit cards fell by 3.9% in the year to April, which sits at an 8-year low of $39.62bn.
At MoneyPlace, one in two customers come seeking a loan for debt consolidation, a proportion that has held true even as the lender grows.
Stoyan explained, “ASIC’s push was not just to change the law, but to educate and promote the fact that credit cards are not a great source of debt. People are now much more aware of the impact that credit card limits have on their ability to secure a loan.
“This absolutely impacts mortgage applications and serviceability. Over the last couple months, we’re seeing more and more brokers who are using personal loans to clean up a customer’s situation – consolidating three credit cards, a personal loan, and a car loan into a single personal loan – ahead of a mortgage application, so the lender assesses it as one loan rather than multiple loans.
“The commentary from multiple lenders post-election is that mortgage applications have picked right back up,” he concluded.
