Credit growth hits lowest point in 10 years

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on December 23, 2019
Credit growth hits lowest point in 10 years

Photo by Matthew Henry on Unsplash

Annual credit growth in Australia has hit a near-decade low, according to the latest Reserve Bank (RBA) data.

Lending to households and businesses grew by 2.3% in the year to November 2019, while it grew by 0.1% over the past month. 

According to the RBA's data, that 2.3% growth rate is the smallest since April 2010 (2.2%), and should boost the chances of another RBA rate cut occurring early next year after last week's positive unemployment figures.

This is the 13th consecutive month that credit growth has fallen - a lack of credit growth essentially means people aren't taking out loans for houses. 

Indeed, housing credit grew by just 0.2% for the month and 2.9% over the year. 

House prices have surged recently, particularly in Sydney and Melbourne, pushing annual housing growth into the positives for the first time since April 2018, following solid declines from 2017's peak. 

However housing credit is a function of both house prices and the volume of properties on the market and being sold.

This is why we're seeing these weak credit growth numbers.

Credit for purchases other than housing (personal credit) such as car loans or personal loans fell by 0.5% month-to-month and by a significant 4.9% year-on-year, while lending to businesses rose by 0.3% and 4.4% respectively. 

Investor numbers fleeting 

Much of the downturn in housing credit growth appears to be somewhat driven by investors. 

In November 2018 investor credit growth was in excess of 1.1% annually, and even managed to hit more than 10% back in 2015. 

But November 2019's annual investor credit growth figure was -0.3%, a negative number for the fourth time in the last six months. 

The table below displays a selection of variable-rate  investment home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

Lender

Variable
More details
AN EASY ONLINE APPLICATION
AN EASY ONLINE APPLICATION

Yard Investment Loan (Principal and Interest) (LVR < 80%)

    Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2022. View disclaimer.

    Owner-occupied credit growth hit 0.4% monthly, which is the smallest figure since June, while its annual 4.7% growth is the lowest since February 2014. 

    Monthly growth  Annual growth 
    Owner-occupier loans 0.4% 4.7%
    Investor loans -0.1% -0.3%

    With three interest rate cuts occurring in 2019, and at least one more expected to happen in 2020, interest rates are at record lows at the moment and don't look like changing anytime soon. 

    The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.

    Lender

    Variable
    More details
    UNLIMITED REDRAWSSPECIAL OFFER
    • Fast turnaround times, can meet 30-day settlement
    • For purchase and refinance, min 20% deposit
    • No ongoing or monthly fees, add offset for 0.10%
    UNLIMITED REDRAWSSPECIAL OFFER

    Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

    • Fast turnaround times, can meet 30-day settlement
    • For purchase and refinance, min 20% deposit
    • No ongoing or monthly fees, add offset for 0.10%
    Variable
    More details
    100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
    • No upfront or ongoing fees
    • 100% full offset account
    • Extra repayments + redraw services
    100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

    Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

    • No upfront or ongoing fees
    • 100% full offset account
    • Extra repayments + redraw services
    Variable
    More details
    ZERO APPLICATION FEESFEE FREE OFFSET
    • We lower your rate based off how much you’ve paid down your loan
    • Automatic rate match
    • No upfront or ongoing fees
    • The shorter your loan, the less interest you pay in the long run.
    ZERO APPLICATION FEESFEE FREE OFFSET

    Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

    • We lower your rate based off how much you’ve paid down your loan
    • Automatic rate match
    • No upfront or ongoing fees
    • The shorter your loan, the less interest you pay in the long run.
    Variable
    More details
    AN EASY DIGITAL APPLICATION
    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    AN EASY DIGITAL APPLICATION

    Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    Variable
    More details
    NO APPLICATION FEES
    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    NO APPLICATION FEES

    Yard Home Loan (Principal and Interest) (LVR < 80%)

    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    Variable
    More details
    NO UPFRONT OR ONGOING FEES
    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    NO UPFRONT OR ONGOING FEES

    Owner Occupier Accelerates - Evaporate (LVR 60%-70%) (Principal and Interest)

    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    Variable
    More details
    NO UPFRONT OR ONGOING FEES
    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    NO UPFRONT OR ONGOING FEES

    Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 80%)

    • No ongoing fees - None!
    • Unlimited additional repayments
    • Easy online application, find out if you're approved quick!
    • Redraw- Access your additional payments if you need them
    • Use the app to get loan insights to help you pay off your home loan faster
    Variable
    More details
    UNLIMITED EXTRA REPAYMENTS
    UNLIMITED EXTRA REPAYMENTS

    Basic Home Loan (Principal and Interest) (LVR < 60%)

      Variable
      More details
      EASY DIGITAL APPLICATION
      EASY DIGITAL APPLICATION

      Neat Variable Home Loan (Principal and Interest) (LVR 70%-80%)

        Variable
        More details
        $0 APPLICATION FEE
        $0 APPLICATION FEE

        Budget Home Loan (Principal and Interest) (LVR < 80%)

          Variable
          More details
          100% FULL OFFSET ACCOUNT
          100% FULL OFFSET ACCOUNT

          Offset Package Home Loan (Principal and Interest) (LVR < 60%)

            Variable
            More details
            LIMITED TIME OFFER
            • Fast turnaround times, can meet 30-day settlement
            • No ongoing or monthly fees, add offset for 0.10%
            • Extra repayments + redraw services
            LIMITED TIME OFFER

            Smart Booster Home Loan Discounted Variable - 1yr

            • Fast turnaround times, can meet 30-day settlement
            • No ongoing or monthly fees, add offset for 0.10%
            • Extra repayments + redraw services

            Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 25, 2022. View disclaimer.


            Disclaimers

            The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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            William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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