Mortgage credit demand in Australia has experienced a substantial increase in the first quarter of the year, according to the latest Equifax Quarterly Consumer Credit Demand Index.

Demand for mortgages increased by 23.5% over the quarter, driven by the gains reported in every state and territory. Home-buyer activity in eastern seaboard states continued to accelerate over the quarter, with Victoria bouncing back from a subdued quarter.

“Ultra-low interest rates are enticing more people into the market, but also an incentive for homeowners to refinance in the quest to find a better rate,” said Kevin James, general manager advisory and solutions for Equifax.

However, overall consumer credit demand remained on a downtrend compared to last year. The slump was driven by the 28.9% decline in credit card demand and a 14.5% decrease in personal loan demand.

“Despite signs that the market may be moving towards post-COVID recovery, credit card demand continues to decline. The reduced economic activity in Victoria from their second lockdown didn’t help, but ultimately a change in consumer behaviour is pushing credit cards out of favour,” James said.

Still, the rate of decline in the overall consumer credit demand appears to be slowing. Aside from mortgages, auto loans and Buy Now Pay Later applications started to pull the overall credit demand from the slump.

"The market is showing a shift to asset-based lending, with mortgages and auto loans proving more popular than liabilities like credit cards and personal loans," James said.