Home Loan Demand Dips in India, Personal Loans and Credit Cards Witness Increase: Transunion Cibil.

Inquiry volumes for home loans for the three months ended December 2022 were 1% lower than the year-earlier period, while the same for personal loans and credit cards shot up by 50% and 77%, respectively, it added.
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Home loans, the mainstay of retail lending, witnessed a dip in demand in the December quarter, credit information company (CIC) Transunion Cibil said on Wednesday.

However, there has been a ‘marked increase’ in demand for credit cards and personal loans, which constitute the more stressful unsecured loans portfolio for banks, the company said.

The demand for unsecured lending products is being driven by the adoption of consumption-led credit products, the CIC said.

Inquiry volumes for home loans for the three months ended December 2022 were 1% lower than the year-earlier period, while the same for personal loans and credit cards shot up by 50% and 77%, respectively, it added.

From a loan origination perspective, home loans witnessed a 6% dip by volume and 2% by value in the December quarter against a healthy uptick in personal loans, credit cards and two-wheeler loans segment.

It can be noted that the period saw a surge in interest rates, which led to concerns over the impact on home loans that are longer term in nature, and any increase in interest rates pushes up either the monthly loan servicing costs or increases loan tenors.

The CIC said young consumers now account for a major share of the demand for loans, pointing out that 43 per cent of the inquiries were by people between 18-30 years of age in the December quarter compared to 40% in the year-ago period and 36 per cent in the December 2020 quarter.

From a geographical perspective, there has been an increase in the share of inquiries from the rural and urban segments at the expense of inquiries from metro areas, it said.

In what should be a data point keenly looked at by the lenders, potential borrowers classified as ‘below prime consumers’ saw a 4 percentage point increase to 40% in the December quarter compared with the same period a year earlier.

Home loan approval rates have come down marginally to 41%, while both personal loan and credit cards saw sharper corrections at 21% each, the report said.

From an outstanding balances perspective, home loan balances were up 16% in December 2022 compared with a 19% growth in credit cards and 33% in personal loans, it added.

The credit card segment has displayed a 0.25% increase in non-payments for more than 90 days at 2.31%, while the same for personal loans has improved by 0.14% to 1%, and home loans have seen a 0.39% improvement to 1.21%.

“In view of the impact of global headwinds, it is crucial to continue to carefully monitor credit risk, especially early delinquencies and leverage ratios,” the CIC’s managing director and chief executive Rajesh Kumar said.