Consumer credit demand continues to increase in New Zealand despite high-interest rates and weak economic conditions, according to new findings.

In the third quarter of this year, credit demand increased by 1.5% compared to the previous year, according to credit rating agency Equifax. The principal growth driver is unsecured credit demand, rising 9.4% compared to last year.

The rising demand is a positive sign, taking into account the challenging economic conditions, says Equifax managing director Angus Luffman.

“Demand for personal loan products continues to increase, led by Kiwis aged 31-45 and is fairly broad-based across the regions,” Luffman commented.

“Personal loans are generally used to fund larger purchases, such as motor vehicles and can be indicative of increasing confidence of consumers to be able to meet larger payment obligations.”

That said, demand for mortgages declined for the ninth straight quarter, down 2.7% over last year, yet the fall has decelerated and was in line with pre-pandemic levels, RNZ reports. The largest declines were reported in Nelson (-18.6%), Tasman (-14.4%) and Southland (-11.2%), with slight improvements in demand in Otago (+0.7%) and Hawkes Bay (+0.6%).

“Mortgage demand, measured by credit enquiries, is a lead indicator of housing turnover and, in turn, price movements,” the Equifax managing director continued.

“With inflation easing and interest rates on hold since May 2023, the demand for mortgages has continued to stabilise, maintaining the improvement from the June quarter after the historic lows observed at the start of the year.

“With increased annual net migration and continued low unemployment, the prospects for a return to mortgage demand growth look solid as we head into 2024,” Luffman added.

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