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Consumer credit market slows to four year low

Consumer credit market slows to four year low as defaults increase

16 October 2008, Auckland – Consumer credit applications are at their lowest point in four years, according to the latest snapshot of the economy from the country’s largest credit information provider, Veda Advantage.

As global credit markets continue to fall, the signs of growing stress are appearing among New Zealand consumers. While overall applications for credit including personal loans, hire purchases and home loans are at their lowest since 2004, the number of consumer defaults has almost doubled in that time.

Figures from Veda Advantage’s credit bureau, which holds the credit files of around 97.5% of New Zealand’s credit active consumers, compare the consumer credit picture for 2008 up to the end of September, with the same period over preceding years.

- Credit applications

o Total applications for consumer credit down 10.5% on 2007
o Applications at lowest for four years
> Mortgage applications
o Down 17% for Jan-Sept 2008 on Jan-Sept 2007
o Mortgage applications at lowest in six years
> Hire purchase applications
o 17.5% decrease for 3rd Quarter 2008 on 3rd Quarter 2007
o 15% decrease from 2nd Quarter 2008 to 3rd Quarter 2008
> Credit card applications
o 10.5% increase in 2008 compared with 2007
> Consumer defaults
o 18% year to date increase on 2007
o 24% increase in September 2008 compared with September 2007
o 32% increase in number of telco bill defaults
o The total number of defaults has doubled since 2004

Veda Advantage New Zealand Director John Roberts says, “The overall decline in applications for credit - with the exception of credit cards, reflects the wariness people have of burdening themselves with additional debt in the current climate. The fact that we’ve hit a four year low for credit inquiries is an indication of how far confidence has slipped.

``We are also witnessing increasing numbers of people turning to the revolving lines of credit offered by credit cards as a means of staving off other debts. Default volumes overall are up 18% on last year, and the big increase in defaults for the month of September is perhaps a harbinger of what’s to come.’’


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