Spike in credit cards and personal loan demand suggests pain ahead
Equifax, which holds credit data on almost 20 million Australians, says early warning signs for a tougher period for banks are emerging, including a spike in demand for credit cards and personal loans in the last quarter.
Equifax’s international president Lisa Nelson, in Australia to meet with major banks, said rising applications for unsecured loans could mean growing strain around rising living costs and the depletion of savings buffers built up during the COVID-19 pandemic.
Equifax’s international president Lisa Nelson in Sydney on Friday. Rhett Wyman
New York-listed Equifax’s latest numbers show applications for new credit cards increased by 6.9 per cent over the three months to September, while demand for new personal loans increased at 8.2 per cent compared with the same three months of last year.
The figures point to some “mortgage shock in Australia”, Ms Nelson said. The Reserve Bank earlier this month flagged a steep jump in income deployed to higher home loan repayments.
“As mortgages become a higher percentage of cash outflows, it is just putting pressure on everything else and is hurting those with lower buffers,” Ms Nelson said in an interview in Equifax’s new North Sydney office.
Those pressures could increase next week, as the chances of the RBA hiking interest rates on Melbourne Cup Day rose after the inflation print last week.
Credit quality will be a focus during the big bank reporting season over the coming fortnight, which kicks off with Macquarie’s results on Friday. While mortgage arrears typically attract most of the attention, Ms Nelson said banks were monitoring unsecured loans closely.
“Given the economic uncertainties, lenders are doing more ‘what if’ scenarios,” she said. “Mortgages are one of
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