Consumer Lending in Australia

COVID-19 impact on consumer lending

The impact on consumer lending of COVID-19 as well as the measures implemented to try and contain its spread in Australia have seen consumers reluctant to take out new loans and even keen to pay off existing debt. This was reflected in the decline in gross lending expected to be seen over 2020 as a whole, while the rise in outstanding balance will have been as much to do with the inability of consumers and businesses to pay off existing debt with much of the economy closed down.

COVID-19 country impact

Full lockdown commenced on 25 March in Australia, while, from 23 March, pubs, clubs, cafés and restaurants closed, other than for takeaway. Gyms, cinemas and entertainment venues also closed.

Authorities look to ensure consumer protection and responsible lending

Against the backdrop of what is expected to be a weaker economy, at least in the short term, due to the COVID-19 pandemic and its economic impact, responsible lending regulatory changes are expected to take priority. The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have therefore been called to appear before the House of Representatives’ Standing Committee on Economics at a public hearing.

Fintechs looking to ease and speed up the path towards taking out a loan

Getting a loan has generally always been something of a tedious, cumbersome and time-consuming exercise that many consumers have traditionally dreaded. However, the financial services industry has seen developments and changes in the way consumer data is controlled and shared.

Mortgages/housing gross lending in decline in 2020

At the midway point of the year, statistics released by the Australian Bureau of Statistics (ABS) showed that fears of housing construction “going off a cliff” had some substance. The figures for new home loan commitments fell by a record 11.

What next for consumer lending?

The sudden and unfamiliar nature of the COVID-19 pandemic, as well as the measures taken to slow its spread, such as lockdowns, closures, travel restrictions and shutting borders, has triggered a global economic shock, which is causing massive disruption in Australia. With the national, and international, state of economic “hibernation”, banks and lenders were grappling with a sudden influx of relief requests from consumer and business customers.

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