Mortgages expand again but at slower pace

Mortgages have again expanded in number and in size as property investors take advantage of relaxed affordability guidelines and falling interest rates.

The combined value of loans granted to housing investors and owner occupiers grew by a seasonally adjusted 3.2 per cent in August to $33.47 billion – a slower pace than July – dragged down by softer than expected figures for owner-occupiers.

The value of home loans to owner-occupiers climbed by 1.9 per cent to $13.55 billion for the month, below the 3.0 per cent predicted.

Thursday’s figures from the Australian Bureau of Statistics also showed the number of new owner-occupier mortgages, excluding refinancing, increased by just 0.7 per cent to 32,740, falling short of an expected 2.3 per cent climb.

The value of investor loans, however, expanded by 5.7 per cent to $4.88 billion, handily beating predictions of a 3.0 per cent climb.

Unlike owner-occupier lending, investor lending expanded on the previous month.

Total mortgage lending had surged by an unexpectedly large 5.1 per cent in July after the Australian Prudential Regulation Authority eased its serviceability requirements so banks no longer needed to ensure customers could still repay their loan at a 7.0 per cent interest rate.

Instead, lenders can now set their own minimum rate floor and use a 2.5 per cent buffer, which the prudential regulator acknowledged could mean larger loans for some.

The Reserve Bank also twice lowered the cash rate in June and July, with the back-to-back cuts bringing the rate to a record low 1.0 per cent.

The RBA cut for a third time in October, but that was after the August lending data period.

The ABS said total lending for the month increased by 0.5 per cent to just over $65.3 billion.

The business lending decline accelerated with a 2.1 per cent drop to $31.83 billion, following a 1.1 per cent decline in July.

But the number of loans for the construction of new dwellings rose by 0.3 per cent to 5,253, following a 1.6 per cent fall the previous month.

The Australian dollar was largely unchanged after the release of the data, and was worth 67.16 US cents by 1140 AEDT.


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