Home loan lending increases, as housing market steadily picks up pace
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New mortgage commitments have seen a monthly rise of almost 5 percent since January 2022, ABS data released today reveals.
The strongest figures were for loan commitments by owner/occupiers, up 5.5 percent compared with investors at 3.7 percent. The rise is a 1 percent increase on February figures.
While it’s an overall improvement, the ABS notes that the $24 billion increase in loans is 26.3 percent down on this time last year. Borrowing rose sharply during COVID, particularly among owner/occupiers. This reflects the corresponding rise in housing values, which analysts put down to low interest rates and government support to protect jobs during the pandemic.
PropTrack economist Angus Moore lending activity was remarkably strong in 2020 and 2021.
“The value of new mortgage commitments in March was up just under 5% compared to April. That’s notable as it’s the first time we’ve seen an increase in new lending since early 2022,” he said. “Even so, we’re seeing a lot less new lending than we were a year ago, down a bit over a quarter compared to March 2022.
“While that’s a substantial pullback, it really reflects just how strong lending activity was in late 2021 and early 2022. The value of new loan commitments is still pretty robust and is substantially stronger than we were seeing in 2019 or early 2020, in part because of the strong growth in house prices we’ve seen.”
His expectation is that the upward trend in lending is set to continue this year, although it may be tempered by further interest rate increases by the RBA.
“External refinancing activity remains very strong and is showing no signs of slowing down,” Mr Moore said. “It hit another new peak in March, with around 28,000 owner occupiers refinancing in March alone – that’s twice as many as we’ve typically seen on average over the past two decades.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Philip Lowe’s comments come amid property industry concerns about pressures on mortgage holders and rising rents
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Leaders in Australia’s property industry are calling on the RBA to hit the pause button on further interest rate rises following yesterday’s announcement to raise the cash rate to 4.1 percent.
CEO of the REINSW, Tim McKibbin, said it was time to let the 12 interest rate rises since May last year take effect.
“The REINSW would like to see the RBA hit pause and allow the 12 rate rises to date work their way through the economy. Property prices have rebounded because of supply and demand. I think that will continue with the rate rise,” said Mr McKibbin.
The Real Estate Institute of Australia today released its Housing Affordability Report for the March 2023 quarter which showed that in NSW, the proportion of family income required to meet the average loan repayments has risen to 55 percent, up from 44.5 percent a year ago.
Chief economist at Ray White, Nerida Conisbee, said while this latest increase would probably not push Australia into a recession, it had major implications for the housing market and the needs of ordinary Australians.
“As more countries head into recession, at this point, it does look like the RBA’s “narrow path” will get us through while taming inflation,” she said.
“In the meantime however, it is creating a headache for renters, buyers and new housing supply that is going to take many years to resolve.
“And every interest rate rise is extending that pain.”
In a speech to guests at Morgan Stanley’s Australia Summit released today, Governor Philip Lowe addressed the RBA board’s ‘narrow path’ approach, navigating continued economic growth while pushing inflation from its current level of 6.8 percent down to a more acceptable level of 2 to 3 percent.
“It is still possible to navigate this path and our ambition is to do so,” Mr Lowe said. “But it is a narrow path and likely to be a bumpy one, with risks on both sides.”
However, he said the alternative is persistent high inflation, which would do the national economy more damage in the longer term.
“If inflation stays high for too long, it will become ingrained in people’s expectations and high inflation will then be self-perpetuating,” he said. “As the historical experiences shows, the inevitable result of this would be even higher interest rates and, at some point, a larger increase in unemployment to get rid of the ingrained inflation.
“The Board’s priority is to do what it can to avoid this.”
While acknowledging that another rate rise would adversely affect many households, Mr Lowe said it was unavoidable if inflation was to be tamed.
“It is certainly true that if the Board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates,” he said.
“But this short-term gain would have been at a much higher medium-term cost. If we had not tightened monetary policy, the cost of living would be higher for longer. This would hurt all Australians and the functioning of our economy and would ultimately require even higher interest rates to bring inflation back down.
“So, as difficult as it is, the rise in interest rates is necessary to bring inflation back to target in a reasonable timeframe.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
