The latest RBA data suggests growth in Australian housing credit is starting to slow

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Credit to Australian housing investors continued to increase in February, although there’s signs that it’s now starting to slow.

According to the private sector credit figures released by the Reserve Bank of Australia earlier today, credit to investors grew by a further 0.6% last month, leaving the it up 6.7% from a year earlier, the fastest growth since February 2016.

The data measures changes in the level of outstanding debt issued to Australia’s private sector.

While credit to investors continued to increase, the pace was below the 0.7% increase of January and the recent cyclical peak of 0.8% recorded in December last year.

The moderation in investor credit growth coincided with tighter lending restrictions from some Australian lenders.

Henry St John, an economist at JP Morgan, thinks that trend will continue.

“Over the last month we have seen the big four Australian banks sequentially re-price new investor mortgages by around 25 basis points,” he wrote following the release of the RBA report. “The bank mortgage re-pricing should begin to act as a headwind to investor credit growth as we head into mid-2017.”

Credit extended to owner-occupiers grew by 0.5% for the month, unchanged from the level reported in January. From a year earlier, it increased by 6.2%, the weakest growth since September 2015.

Combined, total housing credit increased by 0.6% over the month, leaving it up 6.4% from a year earlier.

While credit growth for housing continued to its modest but consistent expansion, the news elsewhere was disappointing, particularly for business credit.

It declined by 0.1% following a 0.4% contraction in January, seeing the year-on-year growth slow to 3.7%, the slowest increase since August 2014.

It’s also less than half the pace recorded in the middle of last year.

“The gradual rotation towards stronger non-mining business investment, a core tenet in the RBA’s characterization of Australia’s growth outlook, is dependent upon a pickup in business confidence and credit to businesses,” St John said.

“Continued sluggish growth in business credit poses a risk to Australian growth outcomes, particularly at a time where real residential investment is in the process of cooling.”

Consumer credit also declined, slipping 0.1% having fallen 0.2% in January. It has now fallen every month since December 2015, leaving the year-on-year contraction at 1.3%.

Combining housing, business and consumer credit, total private sector credit grew by just 0.3% for the month, leaving annual growth at 5%, the weakest increase since June 2014.

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