- The value of Australian home loan lending bounced unexpectedly in October, led by a surge in finance for owner-occupier buyers.
- Excluding refinancing, the value of owner-occupier finance jumped by 4.8%, the steepest increase since February 2016. Lending to investors also edged higher after sliding in each of the prior seven months.
- Economists say this likely reflects temporary “processing delays” as lenders apply more rigorous assessments to home loan applications.
The value of Australian home loan lending bounced unexpectedly in October, led by a strong increase in finance provided to owner-occupier buyers.
According to the Australian Bureau of Statistics (ABS), the value of housing finance increased by 2.6% to $30.031 billion after seasonal adjustments.
Lending to owner-occupiers drove the headline increase, jumping by 3.5% to $20.147 billion. It was the largest monthly percentage gain since August 2015.
Excluding refinancing of existing facilities, the value of owner-occupier finance rose by a larger 4.8% to $13.89 billion, the steepest increase since February 2016.
Refinancing of owner-occupier loans rose by a smaller 0.8% to $6.26 billion, the first increase in three months.
Like owner-occupier lending, the value of loans to investors also increased from September, lifting by 0.6% to $9.884 billion. It was the first time investor lending increase since February this year.
Despite the lift in both owner-occupier and investor housing finance in October, the value of total housing finance still fell by 8.6% from 12 months earlier, a slight deceleration on the 10.8% drop seen in the year to September.
Over this period, the value of total owner-occupier finance fell by 3.2%, or a faster 6% when excluding the impact of refinancing.
For investors, the value of finance slumped by 17.9% from October 2017, reflecting the impact of tighter lending standards for interest-only and highly-indebted borrowers in recent years.
Mirroring the increase in finance extended during October, total loans to owner-occupiers increase by 2.2% in seasonally adjusted terms to 52,654, topping forecasts for a decline of 0.4%.
Loans to buy established dwellings increased by 2.2% to 44,380, while those to build new homes jumped by 3.2% to 5,761. Loans extended to buy new homes was the only category to weaken, slipping 0.5% to 2,513.
Without seasonal adjustments, the ABS said the proportion of owner-occupier loans going to first home buyers rose to 18.1%, up from 18.0% a month earlier.
The ABS does not release data on home loans issued to investors in the housing finance reports.
Matthew Hassan, Senior Economist at Westpac Bank, says the increase in both the value and number of loans approved in October may reflect the temporary impact of tougher home loan application scrutiny.
“Housing finance approvals firmed, reversing some of the sharp weakening over the previous two months, suggesting some of this weakness may have related to processing delays as lenders apply more rigorous assessments,” he said.
“All major states except Western Australia recorded gains, again supporting the idea that ‘processing delay’ disruptions have been a factor.”
So the surge seen in October may not be repeated in the longer-term.
Tom Kennedy, Economist at JP Morgan, is one analyst who is scepitical whether the bounce will last.
“While today’s housing finance numbers come as a surprise, the data can be volatile from month-to-month and October’s release does not change our view that credit growth will remain under pressure in 2019,” he says.
“Underpinning this expectation is our view that near-term supply and demand dynamics are less favorable than in previous years, with the record number of higher density dwellings currently under-construction likely to be completed in the next few quarters and further weigh on prices, reducing speculative demand for housing.
“At the same time, increased regulatory oversight and macro-prudential policy tightening has made it harder to secure finance, further contributing to slowing housing activity.”
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