Veda Advantage Credit Demand Index - February 2008
Credit card, personal loan applications decrease in 2007. Credit Demand Index indicates consumers more cautious about debt.
For the first time in four years, growth in the number of credit card and personal loan applications has decelerated considerably, according to Veda Advantage’s Consumer Credit Demand Index, released today. The slow down in applications corresponds to a significant year-on-year increase in the number of payment defaults across 2007 with a 35.5% rise in reported credit defaults in 2007 over 2006.
In the half year July to December 2007, the number of consumer credit (credit card and personal loan) applications decreased year-on-year by 2% to 3.19 million, almost 70,000 less than the same period in 2006.
Erica Hughes, General Manager of Information Services and Solutions, said the mounting pressure of interest rates hikes and a volatile global economy brought on by America’s credit crunch may have caused some Australian consumers to be cautious about taking on new credit card and personal loan debt in 2007.
“The Consumer Credit Demand Index is a leading indicator of consumer behaviour in the market. The latest report shows there has been a marked decrease in the number of credit card and personal loan applications when compared to 2006, indicating that some consumers may have felt less comfortable about taking on debt,” she said.
Ms Hughes said the Veda Consumer Credit Demand Index measures the number of individual credit applications, but does not record the dollar value of credit approvals – and, as such, it is a measure of consumer sentiment rather than a measure of the volume or value of the overall credit market.
Personal loan applications slowed significantly to a growth rate of 0.3% in the last six months to December 2007 when compared to the previous growth rate of 8.8% for the same period in 2006. The final October to December quarter in 2007 saw a 0.8% decrease in the number of personal loans, with almost 6,000 less enquiries than during the same quarter in 2006.
Credit card enquiries recorded a three-year low, with applications falling by 3.8% or more than 70,000 to 1.77 million in the last six months to December 2007 when compared to the same period in 2006. However the last three months of 2007 saw a 0.6% increase on the same period in 2006 with almost 915,000 credit card enquiries during this period.
Personal loan enquiries in the second half of the year saw a 5.8% decrease compared to the first half, while credit cards increased only slightly by 1.8% with approximately 31,000 more enquiries than the January to June 2007 period.
Ms Hughes said overall applications for both types of debt were less popular in 2007 when compared to the previous year, “Consumers may be concerned about another possible interest rate hike, and may have factored this into their credit and debt decisions,” she said. “The volatile international economy may also have caused some people to be wary of making decisions around debt,” she said.
“Both credit card and personal loan applications have slowed considerably in the last year when you look at the last three years of October to December data. The year-on-year changes are significant, which could also indicate a greater saturation in the market and an adjustment to strong growth in 2005. In 2005 the percentage growth of credit cards and personal loans was 14.9% and 6.7% respectively – compared to the recent 2007 growth rate of just 0.6% and minus -0.8% for that same quarter,” Ms Hughes said
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1 This is the total number of reported consumer defaults to Veda Advantage, including credit cards, personal loans and mortgages. Veda Advantage covers 94% of the credit active population of Australia. These are the most recent default data to October 23 2007.
For more information contact:
Fleur Brown / Sally Robertson at Launch Group - 02 9270 0233 or 0419 270 863
About Veda Advantage - www.vedaadvantage.com Veda Advantage has been at the forefront of the information business for many decades. Issues such as privacy, data security and business intelligence have been part of our commercial landscape since the inception of both our company and our industry. Veda Advantage holds the country's largest database of credit files for more than 14 million credit-active Australians. The vast majority of applications for credit in Australia are checked against the files held by Veda Advantage protecting business from financial risk and ensuring consumers are only offered products that fit their risk profile. You can apply for a copy of your credit file at www.mycreditfile.com.au