The mortgage and auto loan boom – and the return of personal loans
Equifax released its quarterly Consumer Credit Demand Index for March 2021, with strong signs of recovery for the auto and mortgage sectors, but down for personal loans and credit cards.
Equifax, which provides credit information and analysis in Australia and New Zealand, charted loan application volumes in all states and territories for its index, which is widely regarded as one of the best indicators. financial market trends.
The main stories for brokers were that demand for mortgages increased 23.5% from the same quarter in March 2021, which is hardly surprising given the ongoing housing boom, with New Wales from the South and Queensland in the lead.
Brokers will also be encouraged to see the demand for auto finance increase, and a general shift towards asset-based lending away from liabilities such as credit cards.
The rise of Buy Now, Pay Later (BNPL) has also eaten away at the lower end of the personal loan market, although according to Kevin James, general manager of advice and solutions at Equifax, there are still green shoots in it. the top of the range.
“The personality of the person who uses BNPL is closer to the personal loan market than the credit card market,” he said. “The proposals are so different too: personal loans started to grow again, while BNPL took off completely when the pandemic hit. This has slowed down as the personal loan has taken a hit which has now started to grow as well.
While BNPL and individuals seem to be playing in the same place, it is increasingly clear that BNPL is taking the bottom of the market while personal loans have the highest amounts, as shown by lenders such as MoneyPlace, which recently announced a $ 80,000 market leader. product not guaranteed.
“The term of the personal loan is much longer than that of BNPL,” said James. “What you’re seeing in the personal loan business is that with government support, lender support, and superannuation withdrawals, people have paid off high interest debt. I expect total debt on personal loans to have come down. “
“But that doesn’t mean that the amount of new personal loans hasn’t increased. People are a little more cashed in because the savings have increased. It hammered the credit card market. Credit cards are international and therefore did not recover. “
“When we talk about assets, we are talking about the automotive industry. The two fastest growing areas are assets and mortgages. We know the real estate boom, but the used car market has also experienced a boom. People use public transport less, people work two days at the office and therefore drive in. But you’re having a hard time getting new cars now, so people have gravitated. Add to that the fact that people don’t travel overseas, so the RV market has grown.
“When the used car market is on the rise, it is more prone to personal loans, for private to private purchases. This is not playing out in the used car dealership market: you will see it in the broker network not as a car loan, but as a personal loan due to the complexity of auto loans, things like registration PPSR, change of possession. You can see why they tend to do it as a personal loan. “