Demand for unsecured personal loans rose year-on-year in the September quarter bolstering overall consumer debt demand, credit bureau Equifax says.
The latest Equifax Quarterly Consumer Credit Demand Index shows unsecured credit demand rose 9.4% year-on-year, in the September quarter.
Secured loans are backed by collateral, which means if the borrower doesn't make payments the lender can seize the asset serving as collateral. Unsecured loans don't require collateral but typically come with a higher interest rate and have tighter credit requirements because of the added risk to the lender.
Equifax says the growth in unsecured debt was driven by personal loan demand, which rose 16.7% versus the same period of 2022. However, growth in credit cards slowed for the first time in four quarters, slipping 1.2% year-on-year. September quarter mortgage demand was down 2.7% year-on-year.
“This is the second consecutive quarter of positive credit demand following the return to growth in the June quarter. Whilst demand is still not quite at pre-pandemic levels we are seeing underlying strength right across the retail credit product landscape," says Equifax Managing Director, Angus Luffman.
"Demand for personal loan products continues to increase, led by Kiwis aged 31 to 45 and is fairly broad based across the regions. Personal loans are generally used to fund larger purchases, such as motor vehicles and can be indicative of increasing confidence of consumers to be able to meet larger payment obligations," says Luffman.
Personal loans may also be used by some borrowers to help ends meet during tough financial times.
Equifax says across the regions, demand for personal loans was strongest in Taranaki (+25.6%) and Otago (+23.6%), with Manawatu-Wanganui (+21.7%) and Hawke’s Bay (+20.0%) also seeing strong demand. Southland (-1.0%) was the exception.
The regions where credit card demand was strong were Tasman (+16.1%), Marlborough (+12.6%), Taranaki (+12.1%) and Nelson (10.5%). West Coast (-12.1%) and Southland (-11.4%) experienced weak demand.
2 Comments
"Demand for personal loan products continues to increase, led by Kiwis aged 31 to 45 and is fairly broad based across the regions."
i.e. most likely to have a mortgage.
"Personal loans may also be used by some borrowers to help ends meet during tough financial times."
Yup. True dat. A somewhat worrying trend if the growth continues ... Or the RBNZ gets its way and unemployment rises.
"Personal loans are generally used to fund larger purchases, such as motor vehicles and can be indicative of increasing confidence of consumers to be able to meet larger payment obligations," says Luffman." - In other words ...
"In the current period of mortgage interest rates at 10 year highs, inflation and a cost of living crisis, and less people taking out mortgages, consumers are getting more confident that they can afford to buy a car via personal loan" - YEAH RIGHT
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