A drop off in demand for home loans during the December 2021 quarter was predominantly fuelled by lockdowns, according to Equifax New Zealand Managing Director, Angus Luffman.
The latest data from Equifax New Zealand shows a 35.2% reduction in overall consumer enquiries when compared to the same quarter in 2020.
“Extended lockdowns in Auckland have impacted demand leading to big declines across all major retail credit products. The percentage falls are exacerbated by the huge volume of home loan enquiries recorded in the December 2020 quarter.
“Demand reached fever pitch during this period, so it’s important to factor into the equation,” says Luffman.
Released today by Equifax New Zealand, the global data, analytics and technology company, and the leading provider of credit information and analysis in New Zealand and Australia the Index measures credit enquiry volumes for consumer products, including credit cards, personal loans, and home loans.
Overall credit demand for the December 2021 quarter dropped by 30.2% on the December 2020 quarter with Canterbury recording the smallest reduction in consumer enquiries of 21%, and a 4% reduction on quarter three of 2021.
“Despite recording a 23% year-on-year decrease in home lending demand, Canterbury out-performed the Auckland and Wellington markets, which had downward year-on-year December quarter movements of 35% and 36% respectively. “What we could be seeing is more people looking to relocate to a region where property prices are more accessible, but job opportunities are still strong,” says Luffman.
“The significant changes in the way we work over the past two years may also have opened up opportunities in regional areas. Based on housing demand, Canterbury is leading the charge. and in some cases, allowing people to retain their jobs in cities like Auckland and Wellington, whilst living in Canterbury.”
Consumer discretionary spending has been heavily impacted following the August 2021 lockdown in comparison to lockdowns in 2020, with a significant reduction in demand for unsecured credit, says Luffman.
Marlborough was the most affected region with a 46% year-on-year drop in credit card enquiries. Personal loan demand in the December 2021 quarter also took a hit with the largest decreases recorded in Taranaki (- 40%) and Waikato (-38%).
“Although it’s not yet evident what’s causing these decreases in the regions, what we borrow for and how we spend it is changing. When the pandemic first hit in 2020, many people were forced to cancel holidays and that money was being spent elsewhere – whether on domestic travel or home renovations.
“What we’re seeing now is that Kiwis are becoming more circumspect, paying down debt, being more guarded and focusing on purchases that increase quality of life at home, whether that’s a renovation, swimming pool, boat, or a new car. The demand for auto loans has also increased as the supply chain tightens up and vehicles appreciate.”
With the threat of an Omicron outbreak in New Zealand, Kiwis are expected to remain cautious around their discretionary purchases in 2022.
It’s also expected that CCCFA and LVR requirements will have an impact on the availability of home loans and unsecured credit demand. “Credit enquiries are a lead indicator of housing turnover and price movement,” says Luffman, “and despite the increase in house prices across New Zealand in the December quarter, the recent reduction in mortgage demand may indicate cooling prices in the coming quarters.”