'New loans stable as people take advantage of interest rates'

The economic crisis did not have much effect on the loan market due to people trying to take advantage of lower interest rates, according to research.

People attempting to take advantage of lower interest rates resulted in the loan market remaining fairly strong despite the economic crisis, a study has shown.

Datamonitor, a business intelligence provider, found that personal loans had even increased by $0.6 billion to $6.9 billion from September 2008 to September 2009, as reported in FN Arena.

However, Chris Shaw, writing for the financial news and data analyst, said the results are "somewhat surprising" due to figures stating that 36 per cent of those with personal loans agreed that they were suffering from financial stress.

And Mr Shaw said the crisis has since changed the sort of loans that people take out.

He added that September 2009 saw a decrease in vehicle loans to 22 per cent, but there was an increase in refinancing borrowing because interest rates were reduced by 4.25 per cent between August 2008 and April 2009.

This meant average credit card rates then fell by 210 basis points during that time.

But Danny John, writing for the Age, recently said that banks would have a reduced chance of raising rates on credit cards after the Reserve Bank maintained the current level of cash rates.

By Joe Letts