Home loan lending rebounds following Australia’s banking royal commission

  • Australian home loan lending bounced in February, coinciding with the conclusion of the Banking and Financial Services Royal Commission earlier in the month.
  • The value of new loans to both owner-occupiers and investors rose modestly from January. The number of new loans to owner-occupiers also increased.
  • Despite the small increase in February, total lending and loans still remains well below the levels seen in recent years.

Australian home loan lending bounced in February, coinciding with the conclusion of the Banking and Financial Services Royal Commission.

According to the Australian Bureau of Statistics (ABS), the value of new loans to purchase owner-occupier dwellings rose 3.4% to $12.9 billion after seasonal adjustments, faster than the increase in new finance to purchase an investment property which rose by a smaller 0.9% to $4.74 billion.

Markets had been expecting the value of owner-occupier lending to increase by 1% with lending to investors seen dipping by a further 0.5%.

The pickup in lending to investors, in particular, was somewhat of a surprise given the trends in prior months, lifting for the first time since July last year.

“The value of investor loans was a starker turnaround after average declines of 3.6% per month over the previous six months,” said Matthew Hassan, Senior Economist at Westpac Bank.

The increase in owner-occupier lending was also the first since October, and the largest in percentage terms since August 2015.

Despite the modest rebound in lending to both groups during February, total lending still remains well below the levels of a year earlier, reflecting the impact of tighter lending standards, fewer property transactions taking place, less activity from local and offshore investors along with some prospective buyers delaying their purchase in anticipation of further price falls ahead.

Of course, cheaper prices has been also another factor, reducing the amount required to purchase a home in some markets.

Excluding refinancing, the ABS said the value of owner-occupier and investor lending tumbled 13.9% and 29.1% respectively from February 2018.


Refinancing of both owner-occupier and investor loan facilities rose to $9 billion in February, up 2.6% from January after seasonal adjustments. However, like new lending, the total value of refinancing was still down 9.9% from 12 months earlier.

“Despite the rise in February, the longer term story is largely unchanged with new lending to households remaining subdued and well down on levels seen over the past five years,” said Bruce Hockman, Chief Economist at the ABS.

“Lending for owner occupier dwellings in New South Wales is a good example of this broader story, with the series still down over 20% from the peak of lending in August 2017, even after recording an 8.2% monthly rise in lending commitments in February.”

Like the increase in new owner-occupier lending, total loans to this cohort also increased from January after seasonal adjustments, lifting 0.8% to 32,234. From a year earlier, total new owner-occupier loans still fell by 12.5%.

New loans to purchase established properties grew 0.7% to 24,485. Facilities to build new homes also increased, lifting 2.5% from January to 5,622. Those increases helped to offset a 2.4% drop in loans to purchase newly-completed homes which fell to 2,127.

Over the year, new loans across these categories slumped 12%, 5.2% and 31.2% respectively.

The ABS said new owner-occupier loans to first time buyers also rose during the month, increasing by 1.8% to 8,730. However, that was still down 11.3% on the levels of 12 months earlier.

Total refinancing of existing owner-occupier loans also picked up, lifting 4.4% to 16,298, leaving the decline on February 2018 at 6.9%.

From a broad perspective, Hassan said the latest figures fit with a modest improvement in other housing indicators in February, although he cautioned that not too much should be read into the February result.

“The February update was firmer than expected, consistent with the improved tone from auction market activity and a slowing in price declines in recent months. Some of the effects of tightening credit conditions may also be dissipating,” he said.

“[However], the signs of improvement are still only tentative. The market may be starting to find a base in terms of finance activity but conditions remain weak overall.”

While home price falls have spread to more markets across Australia in recent months, the overall scale of declines has moderated, according to data from CoreLogic. While some of the improvement may reflect seasonal trends, recent trends suggest the downturn is not getting any worse at this point in the cycle.

“This continues the run of data over the past few weeks that has generally been above market expectations,” said David Plank, Senior Economist at ANZ Bank.

“For now the market seems to be attributing this to noise rather than evidence of a genuine turn. Our take is a little more positive, though it’s a little early to be definitive.”