Unsecured credit demand climbs 20% as Aussie consumers increasingly turn to flexible payment options and traditional credit cards.
What’s Happening: The Reserve Bank cut rates by 25 basis points to 3.60% in August, triggering a 19.9% surge in unsecured credit demand according to Equifax data. BNPL applications jumped 56.1% while credit card demand rose 25.2% year-on-year, reflecting changing consumer spending patterns.
Why This Matters: The data signals consumers are actively seeking flexible credit options as living costs remain elevated. With mortgage demand also up 10% following the rate cut, lenders face growing pressure to assess repayment capacity amid concerns about long-term affordability in both housing and consumer credit markets.
Australian consumers have embraced flexible credit options in record numbers, with new Equifax data revealing a dramatic shift in borrowing behaviour following August’s interest rate cut.
The Reserve Bank’s decision to lower the cash rate by 25 basis points to 3.60% has coincided with the strongest surge in unsecured credit demand in recent memory, with applications rising 19.9% year-on-year in August 2025.
Rate cut effect
The most striking trend is the explosive growth in buy now, pay later services, which saw demand surge 56.1% compared to August 2024. This growth significantly outpaced traditional credit products, suggesting consumers increasingly favour flexible, short-term payment solutions over conventional loans.
Credit card applications also experienced robust growth, rising 25.2% year-on-year and 7.7% month-on-month. Credit card spending has reached around $38.67 billion in July 2025, approximately 34% higher than pre-pandemic levels, indicating sustained consumer appetite for accessible credit options.
Personal loan demand increased 14.1% year-on-year, while auto loan applications grew a more modest 2.0%.
The BNPL sector’s remarkable growth reflects broader changes in consumer payment preferences, particularly among younger demographics who increasingly favour flexible repayment structures over traditional credit arrangements.
Despite the annual surge, BNPL demand fell 4.9% month-on-month in August, suggesting the market may be experiencing some seasonal adjustment after earlier growth spurts.
Housing market response
Australia’s benchmark rates are now at 3.6%, their lowest since April 2023, and mortgage demand responded accordingly with a 10% year-on-year increase in August.
“Spurred on by another interest rate cut, we saw mortgage demand increase 10% year-on-year in August,” said Kevin James, Chief Solution Officer at Equifax. “This is despite reports that listings are lower than usual for this time of year, illustrating that buyers are in the market and actively looking to take advantage of lower rates.”
The mortgage market showed mixed signals, with refinance enquiries constituting 35.86% of total demand, while new mortgage originations decreased 1.5% year-on-year. Year-to-date mortgage demand remains 5.2% higher than the same period in 2024.
Credit capacity concerns
While demand surges, industry experts are flagging potential challenges ahead. James warned that repayment capacity would become increasingly critical for lenders in coming months.
“Looking ahead, we expect that repayment capacity will become a major consideration for lenders over the coming months, which could in turn have an impact on mortgage enquiries and approvals,” James explained.
He noted that while government initiatives like the expansion of the First Home Buyer Guarantee scheme might temporarily reduce affordability barriers, rising prices could eventually pressure borrowers with lower deposits.
“As more stock comes onto the market during the Spring selling season and prospective home buyers are given a boost by the expansion of the Government’s First Home Buyer Guarantee scheme, we might see affordability become less of a barrier for a period,” James said. “However, over time it’s likely that prices will continue to rise, and lenders will need to carefully consider the long-term repayment capability of consumers who enter the market with a lower deposit.”
With 12.1 million credit cards currently in circulation across Australia carrying $19.7 billion in interest-accruing debt, the sustained growth in credit applications suggests consumers are actively managing cash flow challenges through multiple credit channels.
The data indicates a fundamental shift in how Australians approach borrowing, with traditional boundaries between different credit products becoming increasingly blurred as consumers seek the most suitable options for their immediate financial needs.
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