Australian home loan lending remains subdued

  • The value of Australian home loan lending inched higher in January, led by borrowing by investors.
  • Lending fell by over 2% from a year earlier, driven lower by a sharp decline in investor finance as a result of recent restrictions on interest-only loans.
  • The proportion of owner-occupier loans to first time buyers rose to the highest level since October 2012.

The value of Australian home loan lending inched higher in January.

According to the Australian Bureau of Statistics (ABS), the value of home loans issued in January rose by 0.7% to $33.067 billion in seasonally adjusted terms.

It was the fourth increase reported in the past five months.

Despite recent buoyancy, the value of housing finance fell 2.2% from a year earlier, the weakest result since August 2016.


Helping to explain the annual decline, and despite a modest 1.1% increase in January, lending to investors slumped 12.1% from a year earlier, the steepest drop since June 2016.

It reflects tighter restrictions introduced by Australia’s banking regulator, APRA, on interest-only lending in March last year.

Partially offsetting the decline in investor housing finance, the value of loans to owner-occupiers, excluding refinancing, rose 0.3% in January leaving it up 6.7% from a year earlier.

Year-on-year growth to this cohort had been running at 17.3% just six months ago.

Refinancing by owner-occupiers rose 0.9% in January leaving it down 0.4% over the year.

“Housing finance looks to be stabilising, both in terms of growth rates and types of borrowers,” said Jo Masters, Senior Economist at ANZ Bank.

The total value of outstanding owner-occupier loans issued by Australian ADIs rose to $1.081 trillion in unadjusted terms, a new record high. Outstanding loans to investors fell marginally after hitting a record high in December, falling back to $561.44 billion.

Despite an increase in the value of lending issued in January, the number of loans to owner-occupiers fell by 1.1% to 54,442 in seasonally adjusted terms, below the 0.2% decline expected by economists.

Within that figure, loans to construct new dwellings increased by 3.1%, partially offsetting declines in loans issued to buy new or established dwellings.

Source: ABS

Loans to first-time buyers rose to a fresh multi-year high, increasing to 18% of total owner-occupier loans from 17.9% in December.

That’s the highest proportion since October 2012, and well off the cyclical low of 12.9% set in October 2015.

The rebound in first-home buyer reflects recent stamp duty concessions introduced by the New South Wales and Victorian state governments to help improve housing affordability, along with less investor activity in those markets.

The ABS does not release data on loans issued to housing investors as part of the housing finance report.

Despite weakness in housing finance issued to investors over the past year, with the share of interest-only lending as a proportion of total mortgage lending slowing fast, and with lenders recently reducing rates for fixed-rate borrowers, it suggests that investor activity may rebound in the months ahead.

“Media reports in recent days point to increased competition among the major banks to capture investor lending, and this may offer some support in coming months to the otherwise weak trajectory of this series,” said Henry St John, Economist at JP Morgan.