The value of Australian home loans hits a 7-month high

  • The value of Australian home loan rose to the highest level since August 2017 in February.
  • The value of lending to owner-occupiers and investors both increased, rising by 1.3% and 0.5% respectively.

The value of Australian home loan lending rebounded in February, hitting the highest level since August 2017.

According to the Australian Bureau of Statistics (ABS), the value of housing finance rose by 1% to $33.5 billion in seasonally adjusted terms, driven by stronger lending to both owner-occupier and investors.

The monthly total was the third highest on record, only surpassed by January and August last year.

From a year earlier, the value of total housing loans increased by 2%.

The ABS said lending to owner-occupiers rose by 1.3% to $21.5 billion over the month, the largest percentage increase in four months. In dollar terms, the value of owner-occupier lending hit a record high in February.

From a year earlier, the value of loans to this cohort increased by 7.2%, the fastest increase since August 2017.

Excluding refinancing of existing facilities, lending rose by 1.4% to $15 billion, leaving the increase on a year earlier at 7.6%.

Owner-occupier refinancing rose by a smaller 1% to $6.5 billion, seeing the annual rate of change lift to 6.5%, well above the flat outcome of January.

Like owner-occupiers, the value of investor lending also increased in February, lifting by 0.5% to $12 billion, the second increase in a row.

From a year earlier, the value of investor housing finance slid by 5.9%, a smaller decline than the 11.8% drop seen in the year to January.

In year-on-year terms, lending to investors has fallen in each of the past six months, reflecting more stringent restrictions on interest-only lending implemented by APRA in March last year.

Henry St John, Economist at JP Morgan, said recent weakness in Sydney and Melbourne home prices may also be a factor behind the moderation.

“Through the cycle, investor lending has tended to be fairly responsive to trends in property price growth, and declining returns in the two major investment markets of Sydney and Melbourne is working to lower the expected rate of return for these buyer types, lowering their demand for new financing,” he said.

While the value of lending increased, the total number of loans to owner-occupiers dipped by 0.2% to 55,527 after seasonal adjustments, largely reflecting a steep drop in facilities to construct new dwellings.

They fell by 7.1% to 5,881, masking strength in loans to buy new and existing dwellings which rose by 6.6% and 0.4% respectively to 3,073 and 45,473.

The small headline decrease was half the drop expected by economists.

In original terms, the ABS said the percentage of owner-occupier loans going to first home buyers dipped to 17.9% from 18% in January, snapping the upswing seen for the best part of a year.

“First home buyer lending is up more than 40% over the past year, and accounted for 12.4% of all housing finance in February. That is the highest share of borrowing in nearly five years,” said Daniel Gradwell, Senior Economist at ANZ Bank.

“From the perspective of getting first home buyers into the market, the New South Wales and Victorian state governments’ stamp duty incentives are working a charm.”

The ABS does not release loan numbers for investors as part of the housing finance report.

The ABS is planning to combine its housing and lending finance reports into a single, simpler publication called “Lending to Households and Businesses”. The first publication of this new report is scheduled for release on June 12.

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