The latest increase in interest rates will likely intensify the already surging number of applications for credit cards and personal loans, as more people struggle in the face of higher costs of living. Source: The Age.
As the Reserve Bank of Australia (RBA) lifts interest rates for the seventh month in a row, to take the cash rate to 2.85 per cent – the highest it has been for nine years – figures from credit bureau Equifax show applications for credit cards grew 31.5 per cent in the three months to September, compared to the same period a year earlier.
Credit card demand was 40 per cent higher in the ACT, 36 per cent higher in NSW and 36 per cent higher in Victoria. Overall consumer credit applications were 17 per cent higher.
Households accumulated savings during the worst of COVID-19 as the federal Government extended financial assistance to those who lost their jobs or had reduced hours, banks granted repayment pauses to those with mortgages and discretionary spending was curtailed.
“As the cost of living increases and the impact of interest rate rises starts to hit home…the buffer of household savings [that] consumers accumulated over the past few years is starting to erode,” says Kevin James, the general manager of advisory and solutions at credit bureau Equifax.
The biggest increases in demand for credit cards and personal loans were in NSW, Victoria and the ACT, the states and territories with the highest house prices and biggest mortgages.
The NAB Wellbeing Index shows that the impact of rising costs is being felt by many. In a survey carried out in August and September, almost half of the respondents said higher prices were the biggest cause of stress in their lives.
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Rising cost of living sees surge in credit card applications (By John Collett, The Age)
