The demand for credit to individuals is on the rise over one year. Good vitality partly explained by good rate dynamics, despite a difficult economic context.
Loan outstandings on the rise. In 2018 is a promising year for the production of new credits. Households take advantage of low market rates to take out loans whose costs turn out to be competitive. The trend is marked on mortgage loans as well as on consumer loans. The outstanding amount of housing loans, for example, increased by 5.6% over one year in June, to amount to 987 billion dollars. Consumer credits also benefit from this vitality. Despite declining purchasing power, purchases of consumer goods financed on credit increased 7.4% year-on-year in June. The total outstanding of consumer loans totals 200 billion dollars.
Competition in the banking market facilitates access to loans
The explanations for the increase in demand for mortgage loans can come from low rates, but also from the offers offered by market players. Indeed, credit institutions do not hesitate to sacrifice their margin to develop their client portfolios and perpetuate the relationship. In July and August, the average borrowing rate was 1.53% according to the Good Lenders Statistics. Loans are therefore strategic products for reaching potential customers.
A difficult economic context
In addition, the return to higher inflation has inevitable repercussions on the purchasing power of households. With a 2.6% year-on-year increase in July, households are feeling the brunt of the price increase. Consequently, the sustained demand for consumer loans may result from this situation. In fact, to support their daily lives, some households can use loans. The loan thus becomes a spare wheel to meet the cost of living. And in this difficult context, households tend to turn to precautionary solutions by saving their resources. To then position themselves towards financing rather than draining their cash.
The automotive market contributes to this good momentum
Finally, it should be noted the notable performance of the new car market but also the second-hand one. The purchase of a vehicle is also the first motivation when taking out a loan intended for consumption.