Credit demand slowed in the June quarter as Australian consumers began to feel the strain of rising living costs, according to the latest Equifax Quarterly Consumer Credit Insights.
Unsecured credit applications, including credit cards, personal loans, and BNPL, increased slightly by +0.8%.
“While credit card enquiries increased year-on-year, the volume of opened accounts remained fairly stable,” said Kevin James (pictured above), general manager advisory and solutions at Equifax.
This suggests lenders are becoming more cautious, and consumers are closing accounts to manage finances better.
Secured credit demand drops amid housing stress
Secured credit demand, including mortgages and auto loans, decreased by -2.3% in Q2 2024.
While auto loans saw a +6.3% increase, mortgage demand fell by -4.2% as high interest rates continued to suppress new mortgage loans.
Mortgage accounts in hardship rose by 12.6% quarter-on-quarter, highlighting growing stress among homeowners.
“We are seeing pockets where resilience is starting to weaken, particularly among higher-risk consumers,” James said.
Financial resilience under pressure
Despite the pressures, overall mortgage arrears remain below pre-pandemic levels.
However, Equifax data showed that mortgage arrears among consumers with an “average” credit score have been rising faster than the overall rate for the past four quarters.
“With the tightening job market and potential interest rate hikes, we could see mortgage arrears increasing more rapidly,” James said, indicating that financial resilience may falter in the coming months.
Cautious lending and active debt management
Consumers are increasingly cautious, with more credit card accounts being closed than opened.
Approximately 9.3% of closed accounts were in arrears, reflecting active debt management strategies.
“Consumers are shutting down their credit cards before they fall too far behind on payments,” James said.
As Australians navigate these challenging times, both lenders and consumers are taking steps to manage risks and maintain financial stability.
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