Home lending “disappointing” in April: ABS

Emma Duffy By on June 7, 2019
 
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Photo by Clément Falize on Unsplash

Housing finance remains soft, as house price falls and tightened mortgage lending cool the market, data from the Australian Bureau of Statistics (ABS) shows.

The number of home loan approvals edged slightly higher in April by 0.6% but still remains lower than a year ago.

The incremental rise follows a 3.3% fall in March.

ABS Chief Economist, Bruce Hockman, said the rise in new lending was “modest”.

“New lending commitments for dwellings edged up a modest 0.2% from March to April, with a rise in lending for owner occupier dwellings (1.0%) mostly offset by another fall in lending for investment dwellings (down 2.2%),” Mr Hockman said.

“The steep decline in owner occupier lending commitments seen since late 2017 appears to be slowing, with lending for owner occupier dwellings recording the smallest monthly fall in trend terms (down 0.5%) since April 2018.”

Ahead of the announcement, economists had not expected any change for the month.

Westpac Senior Economist, Matthew Hassan, said the April update was “slightly disappointing given the improved tone from auction market activity and an apparent slowing in price declines”.

“However, it predates the more material improvement that has occurred since the Federal election and the prospective shift that is likely to come following the recent interest rate cut.

“Auction results and consumer sentiment will be more important guide at the moment, with key updates due in the next week,” he said.

Lending for new home building continued to fall, which HIA’s Senior Economist, Geordan Murray attributes to election uncertainty.

“A number of factors are likely to have weighed on the market activity during the month, notably the succession of holidays around Easter and ANZAC Day along with a higher degree of uncertainty as the federal election approached,” Mr Murray said.

“Overall, April was another soft month for home lending and with pre-election uncertainty reaching a peak in May, we are unlikely to see an improvement next month.

“There has been a marked improvement in housing market sentiment in the weeks following the federal election. When combined with the RBA’s rate cut and the prospect that APRA may allow lenders a greater degree of flexibility in assessing loan serviceability, there is cause to be optimistic that lending activity could improve as the year progresses,” Mr Murray said.

Research from ANZ-CoreLogic earlier this week confirmed housing market sentiment is on the up, with property the most affordable it’s been since 2016.

With regulators making it easier for borrowers to get a loan and the RBA cutting interest rates for the first time since 2016, the outlook for the housing market is looking rosy.

Finance experts have predicted at least two more rate cuts before the year is over.

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Emma Duffy
Emma Duffy joined Savings.com.au as a Finance Journalist in 2019 after spending a year as the editor of The Real Estate Conversation. She's most passionate about improving the financial literacy of millennials by writing about complex financial topics in a way that's easy for the average Joe (or Jill) to understand.

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