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Business on the sidelines as credit demand returns

Consumer credit demand returns after five years of inactivity, commercial sector not sharing in the gains.

Georgina Bond
Thu, 14 Jun 2012

Businesses aren’t getting any share of a returning demand for credit.

Statistics from the country’s leading credit bureau, Veda, indicate New Zealanders are getting comfortable borrowing money again.

“The last three months have shown the first consistent increase in demand in the last five years, driven by mortgage applications," says Veda’s managing director John Roberts.

“It is early days, but our data indicates a trend with consumer demand for credit on the rise.”

General consumer credit inquiries were up 11% between March to May 2012, while inquiries for the month of May were up 14% on the same time last year.

Historically low interest rates and inter-bank mortgage wars were helping to drive growth in mortgage applications.

The data also shows applications for personal loans up in all demographics, led by baby boomers, whose demand for credit rose 19% between May 2011 and May 2012.

Demand for credit cards also shot up in this group, with a 32% increase in applications over the same period.

The upswing is positive after the sharp fall in credit demand following the Global Financial Crisis and its recessionary aftermath.

But the new shoots of growth in demand are not shared by businesses: commercial credit demand was down 18% in May 2012 compared to May a year earlier.

This reflects a lack of confidence in the country’s small and medium size enterprises to invest and grow their businesses, Mr Roberts says.

“In Veda’s experience commercial borrowing is 18 months behind consumer borrowing – so by this time next year we can hopefully expect to see businesses back on the growth cycle.”

Georgina Bond
Thu, 14 Jun 2012
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Business on the sidelines as credit demand returns