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Owner-occupiers drive up lending commitments

Data from the Australian Bureau of Statistics on new housing credit has shown a sharp rise in the value of home loan commitments driven by a record rise in owner-occupied lending.

The November issue of CoreLogic’s Property Pulse, which quoted ABS data, revealed that the value of new mortgage commitments has been rising sharply since moving through a trough in May.

The value of new owner-occupied home loan commitments has increased by 17.3 per cent through to the end of September, and the value of investor loan commitments is up 8.4 per cent.

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The rise in the value of owner-occupier housing finance commitments over the September quarter of 12.1 per cent was the fastest quarter-on-quarter gain since the September quarter of 2015, when the value rose by 13.7 per cent.

Growth in investment lending on the other hand has not been quite as strong, but the value of investment loan commitments was still up 6 per cent over the September quarter. This was the fastest gain since the December quarter of 2016. The value of investment loan commitments is now 8.4 per cent higher than the May 2019 trough.

Commenting on the research, CoreLogic head of research Tim Lawless said: “With owner-occupier credit outpacing investment credit, investors now comprise the lowest portion of housing loan commitments since the ABS records commenced in 2003, currently tracking at 24.8 per cent of the value of new mortgage commitments”.

“In contrast, shortly after the first round of macro-prudential rules were introduced in December 2014, investors comprised 43 per cent of national mortgage demand.”

CoreLogic research also noted that the rebound in new housing credit flows is running simultaneously with increased buyer activity and rising residential property values. According to CoreLogic’s Home Value Index, national dwelling values bottomed out in June this year, the same month housing credit began rising.

The improved credit flows have been bolstered by the Australian Prudential Regulation Authority’s decision to relax borrower serviceability rules, as well as the lowest mortgage rates since at least the 1950s.

“Any sign of a material rise in speculative buying activity, higher household debt or a slip in lending standards could be met by another round of macro-prudential credit tightening,” Mr Lawless warned.

“However, at the moment, despite the recent surge in housing credit, investors remain underrepresented in the current market, and overall credit growth (based on the Reserve Bank of Australia’s credit aggregates) remains subdued, implying a strong focus on debt reduction from households.”

Mr Lawless added that the next round of APRA statistics will provide insight into key metrics around riskier areas of lending such as the proportion of interest-only loans and the proportion of high loan-to-value ratio lending, which should provide further guidance around any regulatory response that could affect housing credit activity.

State-by-state basis

In NSW, the value of owner-occupier loan commitments was up 12.3 per cent over the September quarter, compared with a 3.3 per cent rise in investment. Although investment credit growth is slower, NSW has the largest concentration of investment activity across the states, with investors comprising 30.5 per cent of mortgage demand based on value.

In Queensland, investors are driving the largest increases in the value of mortgage activity, with the value of investor loans up 12.5 per cent over the September quarter, compared with an 8.4 per cent lift in owner-occupier lending. Despite the surge in investment lending, investors comprise only 17.9 per cent of mortgage demand across Queensland, the second lowest proportion across the states, after Western Australia.

Mortgage activity is finally showing signs of growth in Western Australia, with the value of owner-occupier lending up 15.8 per cent over the September quarter, while the value of investor loans surged 24.1 per cent higher.

“The quarterly result was the strongest gain for owner-occupier lending since 2009, and the surge in the value of investment loans was the highest since 2005,” Mr Lawless said.

“Mortgage lending is rising from a very low base, especially across the investor segment, after a prolonged period of weak credit growth.”

[Related: Concern raised as lending commitments continue to rise]

Owner-occupiers drive up lending commitments
Lending commitments
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Malavika Santhebennur

Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.

Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.

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