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Wednesday 18

October, 2017 4:02 AM



Home lending hits record

Home lending hits record

The number of loans (commitments) for home owners (owner-occupiers) rose by 1.0 per cent in August.

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12.10.2017 04:22 PM

Credit card debt near decade lows
Aussie home loan lending hits record highs
Housing finance; Credit cards

Number of home loans: The number of loans (commitments) for home owners (owner-occupiers) rose by 1.0 per cent in August.

Value of home loans: The value of all home loans rose by 2.1 per cent in the month and is 7.6% higher over the year.

First home buyers: The proportion of first home buyers in the market increased strongly in August representing 17.2 per cent of loan commitments- a four year high.

Credit cards: The average credit card balance fell marginally by $0.34 to $3,069.10 in August. This was the lowest reading since December 2007. In smoothed terms (12 month average) the average balance was down by 0.1 per cent on a year ago. The home loan data have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending. Credit card data is important for the financial sector.

What does it all mean?

The value of Aussie home lending rose to the highest level on record during August, up by 2.1 per cent to $33.9 billion in seasonally adjusted terms.

Pleasingly, the proportion of first home buyers continues to increase strongly with some Generation Y and millennials gaining access to the Australian housing market for the first time. Young Aussies keen to move out of home have been saving hard and been ably assisted by stamp duty reductions from the NSW and Victorian governments. More loans are being taken out to buy or build homes and a key reason is the incentives being offered by various state governments to first home buyers.

Loans to investors continued to be strong, despite higher lending rates from the major banks and a tightening in lending conditions. The Reserve Bank and Australia’s banking regulator APRA will no doubt be monitoring this development. This could potentially be a theme in tomorrow’s semi-annual Reserve Bank Financial Stability Review.

Overall, more homes are being built and demand remains firm. We expect the housing market to experience a soft landing, and so far the evidence from key industry participants such as Lend lease, Mirvac and Stockland shows this to be the case.

Aussie consumers continue to take control of their finances in the face of rising cost of living pressures. The average credit card debt is near the lowest levels in a decade. Clearly slower wage growth has prompted Aussies to keep debt in check. Wages are ahead of prices but the caution on debt is clearly a good thing. 

What do the figures show?
Housing finance - number

The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.0 per cent in August – the fourth consecutive month of gains.

Excluding the refinancing of dwellings, the number of loans was flat in August.

Loans by owner-occupiers for the construction of homes fell by 2.4 per cent in August.

Loans to buy newly-erected dwellings rose by 1.5 per cent in August.

Loans for the purchase of established dwellings (excluding refinancing) also rose by 1.5 per cent in August.

The number of refinancing transactions rose by 3.5 per cent in August after a fall of 0.4 per cent in July.

Housing finance - value

The value of new housing commitments (owner occupier and investment) rose by 2.1 per cent in August.

Owner-occupier loans rose by 0.9 per cent and investment loans rose by 4.3 per cent in August.

The value of loans by owner-occupiers and investors to build new homes rose by 1.1 per cent to $3.17 billion in August.

Housing finance – other statistics

The value of cancelled loans rose 6.7 per cent in August after declining by 8.0 per cent in July.

Commitments advanced by 9.2 per cent to be 1.0 per cent higher than a year ago.

The proportion of first-time buyers in the home loan market rose from 16.6 per cent in July to 17.2 per cent in August (long-term average 19.2 per cent).This is a four year high.

The proportion of fixed rate loans rose from 18.7 per cent to 19.0 per cent in August.

And the average home loan across Australia stood at $372,500 in August.

Credit & debit card lending:

The average credit card balance fell by $0.34 to $3,069.10 in August. This was the lowest reading since December 2007. In smoothed terms (12 month average) the average balance was down by 0.1 per cent on a year ago.

Of credit cards attracting interest charges, the average outstanding balance rose by $0.87 in August to $1,882.40. The average balance accruing interest was down by 3.5 per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 1.9 per cent on a year ago.

The average credit card limit rose by $6.96 to $9,102.90 in August to be up 0.4 per cent over the year.

Usage of credit card limits stood at just 33.7 per cent in August –around the lowest level in almost 19 years.

What is the importance of the economic data?

Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.

What are the implications for interest rates and investors?

The outlook for home building remains encouraging, supported by strong employment growth and a low and stable interest rate environment. Australia still remains an attractive destination for overseas and local investors. More homes are continuing to be built; new homes are being bought; and more people want to live the Aussie dream and buy their own dream home for their family.

CommSec still sees no change to interest rates in the foreseeable future. The housing market and dwelling investment still continues to be a valuable source of growth for the Australian economy. 

The low level of credit card debt and low usage of credit card limits highlights consumer conservatism. And clearly some of that caution is affecting spending – keeping pressure on retailers. 

Originally published by CommSec
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