There was no sign of a ‘credit crunch’ in the latest Australian home loan lending data

  • The number of home loans approved in Australia rose fractionally in May. The dollar value of housing finance also increased.
  • The dollar value of investor home loans fell again, but it was marginal in scale.
  • JP Morgan says the result is unlikely to be the start of a longer-lasting trend.

There was no sign of a “credit crunch” in Australian home loan lending in May, at least based off data released by the Australian Bureau of Statistics (ABS) today.

Both the number and dollar value of home loans increased modestly during the month, casting doubt on some of the more bearish housing commentary heard in recent months.

After seasonal adjustments, the value of housing finance rose by 0.5% to $31.9 billion over the month, leaving the decline over the past year at 3.7%, a small acceleration on the 3.3% fall reported in the 12 months to April.


The value of owner occupier financing drove the increase, offsetting another modest decline in the value of investor home loans.

Finance to owner-occupiers increased by 0.7% to $21.168 billion, leaving the increase on a year earlier at 2.1%. Annual growth had been as high as 7.2% in February this year.

Excluding refinancing, the value of loans rose by 0.8% to $14.85 billion. That was 1.6% higher than a year ago.

Refinancing of existing owner-occupier loans increased by a smaller 0.6% to $6.317 billion, up 3.4% over the year.


Continuing the trend seen in recent months, the value of investor finance continued to decline, falling 0.1% to $10.738 billion.

From a year earlier, the dollar amount extended to investors slumped by 13.4%, reflecting the impact of tighter home loan lending restrictions, including the introduction of a 30% cap on interest-only loans as a percentage of all new home loans written.

Despite the steep annual decrease, it was actually smaller than the 15.2% level reported in the year to April.


Mirroring the increase in the dollar value of owner-occupier lending, the number of home loans approved also rose modestly over the month, increasing by 1.1% to 53,037 in seasonally adjusted terms.

Loans to construct or buy new dwellings both increased, lifting by 1.2% and 0.1% respectively to 5,684 and 2,880.

Owner-occupier loans to purchase existing dwellings also rose by 1.2% to 44,473.

The ABS said than in actual terms, the proportion of loans issued to first time buyers held steady at 17.6%. That remains just shy of the multi-year high struck earlier in the year and largely reflects the introduction of stamp duty concessions introduced by the New South Wales and Victorian state governments last year.

Data on the number of investor loans will be released in the separate lending finance report from the ABS on Friday.

Henry St John, Economist at JP Morgan, suggests the report offered some respite for the housing finance after falling in the prior two months.

“Tthe unwind both in new lending approvals and growth in credit had been faster than our initial expectations, and some of this may have been the consequence of the Banking Royal Commission bringing forward the inevitable adjustment,” he said.

However, he doesn’t expect the small uptick seen in May to be the start of a new trend.

“We view today’s release as a pause, rather than a reversal, in the broader trend,” he said.

“Regulatory pressure, falling property prices and persistently high short term bank funding costs are likely to continue to cap both demand for and supply of new loans.

“Under these conditions, we would expect investor lending in particular to continue gradually moderating in coming months.”