New lending to households increases

The value of new lending commitments to households rose 0.6% in April, seasonally adjusted, according to the latest Australian Bureau of Statistics (ABS) figures.  

The rise comes after a 3.3% drop in March. Year-over-year, though, the total amount of new lending to households remained lower than a year ago—down by 15.6 %.

New lending commitments for dwellings slightly climbed by 0.2% from March to April, with a 1% rise in lending for owner-occupier dwellings. Lending for investment dwellings, on the other hand, slid by 2.2%.

“The steep decline in owner-occupier lending commitments seen since late 2017 appears to be slowing, with lending for owner occupier dwellings recording the smallest monthly fall in trend terms (down 0.5%) since April 2018”, ABS Chief Economist Bruce Hockman said.

The report showed a small rise in the number of loans to owner-occupier first-home buyers (0.1%) in April, while the number of loans to owner-occupier non-first-home buyers dropped by 2%.

The number of owner-occupier home loans (excluding refinancing) fell by 1.1%. Including refinancing, loans fell 1.2%.

“The housing market continues to rebalance. First-home buyers continue to take a greater share of the market. And the average home loan, while down a touch over the year, is still at historically high levels. With purchase prices lower and interest rates at generational lows, some budding buyers may be using the current conditions to trade up. The number of loans to owner-occupiers fell in April, but the value of loans rose, Craig James, chief economist at CommSec, said.

The Reserve Bank of Australia recently cut the cash rate to 1.25%, while the Australian Prudential Regulation Authority proposed the easing of APRA serviceability guidelines. Both of these developments are positive for dwelling investment, according to Maree Kilroy, economist at BIS Oxford Economics.

“We expect further rate cuts before the years' end. This will materialise positively in the lending data for established dwelling loans in another three to six months,” Kilroy said.