New mortgages ‘fell further’ in January 2023, CBA reveals

The Commonwealth Bank’s (CBA) lending data for January 2023 has shown new housing lending fell further at the start of 2023.

Both investor and owner-occupier lending continued to decline in January, while alterations & additions remain the only category of lending to still be above its year-ago levels.

It follows the bank reporting an 18 per cent decline in its first half of the financial year results ended 31 December 2022, which marked $17 billion less in new home loans compared to 2022.

As interest rates have reached 3.35 per cent and the Reserve Bank signals more to come, interest payments on housing debts “will swell in the coming months”, CBA economist Stephen Wu said.

Mr Wu noted that the continued roll-off of fixed-rate loans onto higher mortgage rates has increased interest charges.

“A large share is coming off two-year fixed terms, which had been the most popular term for fixing over 2021,” Mr Wu said.

The data also showed while mortgage prepayments (into offset or redraw accounts) in aggregate increased over the pandemic as incomes held up, the flow of these excess payments appears to have plateaued, alongside personal lending.

While growing mortgage repayments swallow borrowers’ discretionary spending, the major bank’s half-year results reported $5 billion in net profit, up 10 per cent from the previous year, supported — in part — by higher mortgages.

February blues, spending eases

Given the rapidly rising rate environment and tighter serviceability, Australians are spending less and shifting their purchases, according to ANZ Economic Insights team.

ANZ’s spending data showed a 3.6 per cent drop year-on-year in the week to 18 February, following the RBA’s ninth cash rate hike.

“But there’s been a strong pick-up in entertainment and travel spending, suggesting that households are shifting their consumption between discretionary categories, rather than reducing their total discretionary spending sharply,” senior conomist Adelaide Timbrell noted.

The data showed travel spending lifted 11 per cent year-on-year, on the back of a significant rise in airline (119 per cent) and travel agency (up 114 per cent) spending.

“This suggests people are still making future travel plans and minted to spend more on discretionary purchases through the year, as their actual travel begins,” Ms Timbrell said.

However, shopping was down 9.9 per cent year-on-year, as households cut back spending on clothing (down 13 per cent) and electronics (down 4 per cent).

“We expect spending to slow materially later in the year as the RBA is forced to hike the cash rate to a restrictive 4.10 per cent and households grapple with rising cost-of-living pressures,” Ms Timbrell said.

As the cost pressures facing Australians grow, refinance activity has been hitting new records with more than $19.5 billion of loans changing lenders in November, new data has shown.

[Related: CBA reports 18% drop in new mortgages]