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August, 201712:15 AM



Lending at 7-month highs

Lending at 7-month highs

Total new lending commitments (housing, personal, commercial and lease finance) rose by 8.3 per cent in June to $73.6 billion ? a 7-month high. Commitment are up 15.6 per cent over the year.

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11.08.2017 05:06 PM

Business borrowings surge; Lending at 7-month highs
Lending finance

Lending finance. Total new lending commitments (housing, personal, commercial and lease finance) rose by 8.3 per cent in June to $73.6 billion – a 7-month high. Commitment are up 15.6 per cent over the year.

Lending rose across all key category’s, but the main strength was in commercial loans. Commercial finance rose by 13.7 per cent in June to be up 29.6 per cent on a year ago.

Trends: In trend terms, loans for alterations and additions of homes (renovations) hit 7-year highs. The lending figures have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending.

What does it all mean?

The latest lending data was certainly upbeat. Not only did new lending surge by over 8 per cent in June, but it is now holding at the highest levels in seven months. More importantly the strength in lending was broad-based with all categories noting a lift. However the icing on the cake has to be the surge in commercial loans.

Commercial lending rose by over 13 per cent in June and is now up almost 30 per cent on a year ago. The Reserve Bank has continued to discuss the subdued non-mining investment landscape, however this maybe the
first signs of an upcoming lift in investment. Certainly the business environment remains attractive. Business conditions are holding at the best levels in over nine years and it just maybe translating through to a lift in investment over the coming year.

Interestingly loans to renovate hit 7-year highs in trend terms in June, suggesting that more people have decided to stay put and add extra rooms or revamp kitchens and bathrooms. Still others may be sprucing up their homes for sale, following the advice on TV makeover shows. Whether it is the purchase of a new property or updating an existing abode, the family home is the centre of the universe.

While some have been taking out bigger loans to buy homes, it is clear that consumers more generally are paring back other forms of debt. Non-housing loan commitments are at the lowest levels for over 14 years. High and rising debt tends to get plenty of coverage, not so the more conservative attitude to debt which is actually the more dominating trend.

What do the figures show?
Lending Finance:

Total new lending commitments (housing, personal, commercial and lease finance) rose by 8.3 per cent in June to $73.6 billion – a 7-month high. Commitment are up 15.6 per cent over the year.

All housing finance rose by 0.2 per cent in June with construction and purchase up 0.3 per cent and alterations and additions down 7.3 per cent.

In trend terms, loans for alterations & additions hit 7-year highs in June.

Commercial finance rose by 13.7 per cent in June after falling 6.9 per cent in May. Within commercial commitments, fixed lending rose by 10.8 per cent while revolving credit rose by 25.9 per cent. Commercial loans are up 29.6 per cent on a year ago.

Personal finance rose by 1.5 per cent in June – the first gain in six months. Fixed lending commitments fell by 2.1 per cent, while revolving credit commitments up by 7.6 per cent. Personal loans are down 13.3 per cent on a year ago. In trend terms personal loans are at 14½-year lows.

Lease finance rose by 2.2 per cent in June to stand 14.6 per cent higher over the year.

What is the importance of the economic data?

Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.

What are the implications for interest rates and investors?

Consumers aren’t keen to take on new debt. The main exceptions being loans to buy or renovate homes or to buy a new or used cars. In total though, personal lending is the lowest in 14½ years.

However it is a different perspective for the business sector. The strength in business conditions is seemingly translating through to a lift in commercial and lease loans – although it is still early days.

CommSec expects no change to interest rates for the next year.

Originally published by Savanth Sebastian, Senior Economist, CommSec
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