Picture by Emil Kalibradov

According to Equifax's Quarterly Consumer Credit Insights, the December quarter saw the first positive growth for secured credit demand since 2021.

Mortgage applications were up 0.5% in the December quarter compared to December '22, while car loan applications also increased 3.9% through the year.

Kevin James, General Manager of Advisory and Solutions at Equifax, said stable interest rates likely encouraged more Aussies to apply for home loans, and that existing mortgage holders could also have seen some relief.

"Refinance demand dampened, suggesting that existing mortgages are also experiencing some financial relief," he said.

Roy Morgan reported earlier this month that the number of Australians experiencing mortgage stress decreased for the second straight month in November, despite the RBA's Melbourne Cup Day rate hike.

There were still nearly 1.5 million mortgage holders at risk of mortgage stress though, which remains among the highest on record, and Equifax recorded 33% annual growth in early delinquency for December.

Plenty of Australians continue to struggle with their home loan repayments, but Mr James said a slowdown in the growth of arrears could be cause for optimism.

"The number of accounts 30-89 days past due grew 33% year-on-year in Q4, compared to a 47% increase reported last quarter, another indication that softer economic conditions are providing some breathing room for mortgage holders," he said.

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Drop in unsecured credit cause for optimism?

The report also recorded a 5% drop in applications for unsecured credit compared to Q4 '22.

While credit card applications rose slightly (up 1.2%), there was a 0.7% decline in Aussies looking for personal loans, and a 18.7% drop in Buy Now Pay Later applications.

ABS lending data for November 2023 showed a 5.6% drop over the month in demand for personal loans, down to $2.38 billion.

Mr James said this reflected changing consumer preferences in response to the elevated cost of living and high interest rates, which combined with inflation moderation had likely bought relief to some households' budgets.

"This was reflected in the decreased demand for unsecured credit, as people relief less on credit cards and personal loans to bridge the financial gap," he said.

However, he said there were still plenty of indicators households remain under the pump, and more tough times could still be ahead.

"Credit card early arrears remain above 2022 levels, with accounts 90+ days past due up 15% versus Q4 2022," Mr James said.

"We often see a spike in arrears in the first half of the year as festive season spending hits credit balances.

"We expect consumers’ financial resilience will be tested as the record spending seen in November falls due over the coming months."