Throughout the pandemic, data from TransUnion has shown a reduction in consumer demand for credit while lenders’ appetite to open new accounts has also diminished. But that could change.
Almost a third of South African consumers plan to apply for new credit or refinance their existing debt within the next 12 months, according to the latest report from TransUnion.
The credit bureau on Tuesday released the South Africa Industry Insights report for the second quarter of 2021. The report showed that the total number of consumers participating in the credit market has not increased significantly from pre-pandemic levels. It has remained stable from year to year.
But that was a change from when the lockdown started. TransUnion said that throughout the pandemic, its data has shown reduced demand for credit among consumers, while lenders’ appetite to open new accounts has also diminished.
The company said that while this continues into the second quarter of 2021, research it undertook afterwards showed that fewer consumers expected their household finances to fully recover in the next 12. month.
Just under a third (31%) of consumers said they would apply for new credit or refinance existing credit in the next year to stay afloat. Among those considering taking on new credit, applications for personal loans (43%) and new credit cards (35%) top the list.
Even in the second quarter, when there were fewer new loan arrangements year over year for all products, those with existing lines of credit used them more.
Data from TransUnion showed that the total amount borrowed by consumers, as measured by outstanding balances, continued to rise.
“In the space of unsecured loans, the growth in the balance reflects the liquidity provided by these products and suggests that financially affected consumers are using these much-needed sources to help balance household finances,” the credit bureau wrote in the. report.
For secured loan products, such as home loans and auto finance, where consumer accounts rose 4.6% and 2.7% respectively, TransUnion said that growth is showing signs of a rebound in the consumer market. credit.
In recent quarters, an increase in delinquencies had also contributed to the growth in consumer unpaid balances. Credit card arrears in particular were brought down to the same level recorded in the second quarter of 2019.