March quarter credit demand remains soft as consumer re-financing activity hits new lows

Banking / news

Overall consumer credit applications dived by almost a third with home loan applications down by -42% and unsecured credit applications down -32% in the March quarter

22nd Apr 22, 9:49am by admin

According to the latest Quarterly Consumer Credit Demand Index, overall consumer enquiry volumes declined for the 3rd quarter in a row, with a year-on-year reduction of -32% for the quarter ending March 2022. However, consumer credit demand remains above the lows experienced during the Q2 2020 lockdown.

Released today by Equifax New Zealand, the Credit Demand Index measures applications for retail credit products, including credit cards, personal loans, and home loans.

Consumer credit demand was down across all major retail credit portfolios, with the largest decline being for home loans as borrowers continued to pull back from a market that was at its peaks this time last year.

“With rising interest rates, CCCFA and other related lending constraints, home lending enquiries fell by -42% year-on-year for the March 2022 quarter. However, home loan enquiries for the quarter March 2022 were above quarterly volumes for 2019 and the first half of 2020”. said Angus Luffman, Managing Director Equifax New Zealand.

The softening demand is also playing out in lower numbers of new retail credit accounts being opened, which continue to be near their lowest levels since the start of the pandemic.

Demand for credit is being significantly impacted by a sharp fall in consumers re-financing or moving their credit relationships. Consumers refinancing their loans is at its lowest level since the start of the pandemic and down ~80% on 2019 levels.

“The decline in refinancing activity commenced with the Delta outbreak and lockdown in August 2021, dropping to near March 2020 levels. The commencement of CCCFA changes saw a further acceleration in the decline of refinancing activity. Such a significant drop indicates consumers are holding onto their current relationships, rather than take the risk and effort of trying to get a better deal elsewhere,” says Luffman.

Unsecured credit demand activity also declined, with the biggest impact being for credit card enquiries which fell by -36% year-on-year for the March 2022 quarter. Personal loan applications, by comparison, dropped by almost -30% for the same period.

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18 Comments

by Tee | 22nd Apr 22, 10:02am 1650578565

Lower home loan enquiries, saw a zero clearance rate for a B & T auction, all these point to a slowdown in the property market.

Need tourism to pick up the slack.

by Fitzgerald | 22nd Apr 22, 10:42am 1650580963

I've long thought that Ireland would provide the template for our housing market correction.

But with the way things are working out, it now seems that our house prices will fall MUCH faster than the Ireland crash.

Seems that liquidity is very quickly draining out of the market.

by Beanie | 22nd Apr 22, 11:22am 1650583332

You have to wonder if the government, knowing that a house price correction is now in motion, are trying to hurry it through in the hope that prices are rising again come election time at the end of next year. Because if prices are still dropping they are certainly toast.

by Homer | 22nd Apr 22, 11:49am 1650584973

I think they are toast anyway. They’ve shown themselves to be an inept bunch of fools who have over promised and under delivered. A one trick pony and that pony’s time is coming to an end. They have hurt the very members of our society that they promised to help and have destroyed their voter base in doing so. The Twyford tapes on housing are just embarrassing to watch. The empty policies on heath and education, the economy and the promise of transparency in Government were just lies to gain and hold power. What traction we have lost as a nation and we are witnessing the further gutting of our national spirit. What a waste of time !

by Noncents | 22nd Apr 22, 11:58am 1650585491

Ironically they were voted in to reduce house prices.

by Averageman | 22nd Apr 22, 2:07pm 1650593256

Agreed. Avoiding implementing of DTi in the first term was a critical error. They only got term 2 because Nats were swapping leaders and the public ran scared from the Green agenda

by Tee | 22nd Apr 22, 2:33pm 1650594809

Saw an ad for a house for sale in Wellsford, $765,000 for an old ex-rental. Metal roof, carpets and wallpaper looks old and tired.

I am wondering who will buy - owner occupier or investor, how much finance.

Just a year ago, any house could be sold. Nice or tattered.

by Jonny_Utah | 22nd Apr 22, 1:05pm 1650589555

A group chat of mine, normally concerned with the officiating of the NZ Warriors matches, has had a full blown meltdown about the state of the economy this morning.

It's finally happening, the can has been kicked into a cul de sac.

by Beanie | 22nd Apr 22, 1:11pm 1650589891

Caught up with a young couple I know that bought a house 18 months ago. They can see the writing on the wall now and so have just sold all their toys that they couldn't bring themselves to sell at the time. They want to have some cash under the mattress, and figure the toys will only get cheaper to buy back.

by Nzdan | 22nd Apr 22, 4:54pm 1650603258

Much like my group chat, it turns into a partisan whinge fest blaming the incumbent Government for creating a mess that's literally decades in the making.

by Homer | 22nd Apr 22, 5:20pm 1650604844

The current Govt certainly share the blame but, as you state, this has been building for a long time. The point is that none of them (political parties of any persuasion) have taken the hard decisions to do what needed to be done to stop the madness. Instead, with their snouts in the public trough, they play us for fools and ingratiate their egos while ‘kicking the can’. We are getting what we collectively deserve. We need a board of directors not a government !

by theglc | 22nd Apr 22, 11:33pm 1650627182

And the more it went on the bigger the bubble, someone always gets left holding the bag.

But this time they are powerless to do anything, already blown $60B and inflation is through the roof, so interest rates are heading north for quite some time.

There is no new money coming into the country to continue the ponzi, so its game over for now...

by Nzdan | 23rd Apr 22, 12:29am 1650630591

To be fair to this current Government, they have at least made attempts to legislate the issues. For example the foreign buyer ban, removing interest deductibility (staged) and then the CCCFA. Various lobby groups claimed the CCCFA severely disadvantaged first home buyers, the very group of people these lobby groups are seeking to exploit.

What other hard decisions need to be made? Without upsetting lobby groups of course.

by dla06c | 23rd Apr 22, 9:38am 1650663527

Yeah, but both were token measures. Before the foreign buyers ban, their own analysis in 2017 reported that curbing foreign investment would only have marginal impacts, and that the primary drivers were domestic investment and lending practices. But they let those run wild until they were already showing signs of burning out and introduced the CCCFA after the market was starting to fall off the cliff.

by agnostium | 22nd Apr 22, 8:27pm 1650616074

The reality is that anyone who bought during the boom is to blame. It's the willing buyers who inflated the bubble.

by RickStrauss | 22nd Apr 22, 1:28pm 1650590914

Who would have thought that adding a personal responsibility element to financiers' lending would have such an effect on loan writing.

by Wrong John | 22nd Apr 22, 2:56pm 1650596204

The great slow down is in full swing. We had to have it after the debauched (and frankly quite incompetent) monetary policies of the past two years. We are out of balance & 2022 will help rebalanced things. It's going to tough for some but most will battle through. This will be my 4th or 5th downturn, depending on your definition. They are usually character building.

by DTRH | 22nd Apr 22, 9:48pm 1650620926

This one is set for a number of years but it will bottom out and society will be in a better place. Hopefully more people will be able to purchase a property and still live not just exist.