The value of Australian home loan lending rose modestly in October, recovering from a sharp decline in September.
And it was led by a modest bounce in investor lending.
According to the Australian Bureau of Statistics (ABS), the value of lending rose by 0.6% to $32.503 billion in October in seasonally adjusted terms.
From a year earlier, that represented a decline of 0.2%, a smaller drop than the 0.5% level reported in September.
Lending to investors rose by 1.6% to $11.958 billion in seasonally adjusted terms, a comparatively small bounce after falling 7% a month earlier.
Reflecting attempts by Australia’s banking regulator, APRA, to cool lending to this cohort, lending to investors fell 6.1% from a year earlier, almost unchanged from the decline recorded in September.
“Investor loans continue to slide as a share of total new lending, having fallen from 40.3% in January, to 36.8% as of October,” says Henry St John, Economist at JP Morgan.
“This corroborates the data released this week by APRA, which show a significant slowing in interest-only lending through Q3, of which a significant portion falls on investors.”
St John says that he expects investor lending will continue to slide relative to owner-occupier lending in the months ahead.
The rebound in investor finance helped to mask flat growth in new lending to owner-occupiers in October.
Excluding refinancing, the ABS said lending to this group rose by 0.1% to $14.689 billion in seasonally adjusted terms, largely offsetting a 0.1% drop in refinancing which fell to $5.856 billion.
From a year earlier, owner-occupier lending excluding refinancing rose by 10.6%, a smaller deceleration on the 12.1% level reported previously.
Refinancing fell by 10.7% over the same period, a slightly slower decline than the 14.2% decline reported a month earlier.
In original terms, the value of outstanding loans issued by Australian authorised deposit-taking institutions (ADIs) to owner-occupier and investors stood at $1.063 trillion and $559.51 million respectively. Both were record highs.
Along with the surprise bounce in the value of lending, the number of loans issued to owner-occupier also topped expectations, falling by 0.6% to 55,406 in seasonally adjusted terms, far smaller than the 1.3% decline expected.
Total loans to buy an existing dwelling fell by 0.4% to 46,199. Elsewhere loans to construct or buy a new dwelling fell by 1.4% and 1.6% respectively to 6,075 and 3,132.
As a percentage of total owner-occupier loans, those going to first-home buyers rose to 17.6% in original terms, up fractionally on 17.4% a month earlier.
It currently sits at the highest level since November 2012, largely reflecting stamp duty concessions to first home buyers in New South Wales and Victoria to help improve housing affordability in those states.
“The value of loans to first home buyers rose by 5.7% in the month,” said Kristina Clifton, Economist at the Commonwealth Bank.
“Lending to first home buyers lifted noticeably around mid-year as the New South Wales and Victorian state governments introduced stamp duty reductions for first home buyers.”
The ABS does not disclose the number of loans issued to investors as part of the housing finance release.
Clifton says that looking through the monthly volatility in the data, the underlying trends point to a continued slowdown in the housing market.
“Today’s data is consistent with other indicators that show that conditions in the housing market are cooling, particularly in Sydney,” she says.
“The data shows an easing in lending to investors. Lending to owner occupiers is tracking sideways due to an increase in lending to first home buyers.
“The easing in investor lending and lift in first home buyer loans are very welcome developments.”