Australians looking for cheap form of debt
The latest Veda Advantage Consumer Credit Demand Index shows Australians are increasingly choosing personal loans over credit cards as interest rate rises continue to stimulate a push towards cheaper forms of debt.
According to Veda Advantage, while demand for consumer credit is still strong, they are seeing a growing shift away from credit cards. This may be because the latest Reserve Bank credit rate rise has added to Australian’s sustained concern over interest rates, making the low rates of interest available through personal loans increasingly attractive.
Veda Advantage figures show that personal loan applications rose by 66,906 or 9.7% to 756,710 in the April to June quarter when compared to the corresponding period in 2006. There was a steady 1.5% increase in personal loan applications when compared to the January to March quarter of 2007.
In contrast to personal loans, credit card applications fell by 8.8% in the April to June quarter compared with the same quarter in 2006, down 82,348 applications to 849,396. This was a 4.5% decrease on the January to March quarter this year, with 40,000 fewer enquiries.
This is the fifth quarter in a row that credit card applications have fallen. Credit card applications grew by 16% in the financial year to June 2006. This financial year they fell by 3.8%.
This looks like a considered adjustment against strong growth last year. It illustrates that concern over interest rates is a real issue in Australia. Whilst it appears this concern has yet to translate into fear with credit demand remaining strong, Australians are taking active steps to protect themselves against future interest rate increases, and are looking for cheap forms of credit found in personal loans.
The Credit Demand Index provides a powerful indication of consumer intentions, and what Veda Advantage is seeing represents a trend towards low interest personal credit. It will be interesting to see how the banks and other credit providers respond.
The Veda Advantage Consumer Credit Demand Index:
The Veda Advantage Consumer Credit Demand Index provides a measure of the market for unsecured discretionary consumer credit products, credit cards and personal loans, in Australia.
The Index does not measure residential mortgages, which form a significant proportion of total credit applications, or credit applications for utilities and telecommunications companies.
The data is sourced from Veda Advantage’s Australian consumer credit bureau information. Veda Advantage facilitates credit reference checks for Australia’s major banks and lenders and underpins the ability of consumers to exercise choice in relation to consumer credit products.
The vast bulk of applications for consumer credit in Australia are checked against the 14 million personal credit history files held by Veda Advantage.
The Veda Advantage Credit Demand Index data can be accessed in the media section of its website.
16-Aug-2007