Annual growth in home loan debt at 12 year high, but headwinds on the way

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on April 29, 2022 Fact Checked
Annual growth in home loan debt at 12 year high, but headwinds on the way

New Reserve Bank data shows annual housing credit growth hit 7.9% in March - the highest figure since August 2010.

This was largely buoyed by investor lending growth, up 5.3% annually - the strongest rate of growth since February 2016.

For owner occupiers, annual growth hit 9.1%, largely consistent with previous months' annualised growth in home loan debt. 

Month-on-month growth across all home lending was 0.6%, largely consistent with how it's been over the past year.

Westpac economist Andrew Hanlan said it was stimulus and low interest rates driving the strong growth in debt.

"Looking ahead, housing credit growth is set to cool with an imminent RBA tightening cycle, likely beginning with a rate rise at the May meeting," Mr Hanlan said.

"There are tentative signs that a cooling of the owner-occupier market is already unfolding, impacted by stretched
housing affordability after the rapid run-up in dwelling prices."


Despite the growth in home lending, over March ANZ lost approximately $224 million in owner occupier mortgages, according to prudential regulator data.

Investor lending, however, grew by approximately $142 million.

This result was weaker compared to its big four bank compatriots:

  • CBA added approximately $1.38 billion in owner occupier loans; investors up $638 million.
  • NAB up $1.27 billion, and $534 million.
  • WBC up $581 million, and down $106 million.

ANZ's mortgage churn is well-documented, where at one stage in 2021 it was losing $1 billion in mortgage customers per month.

This was reportedly due to lagging home loan approval times, especially through brokers, with the onboarding of new customers outpaced by existing customers refinancing away.

Rate hikes to hit lending volume, house prices

The growth in home loan debt could change if the RBA starts increasing its cash rate target in either May or June, according to Westpac economists. 

The major bank forecasts the cash rate to sit at 1.5% by the end of 2022 - 140 basis points higher than it is now.

"Both higher [consumer] prices and higher interest rates will be a significant squeeze on household incomes," Westpac economists said.

Westpac predicts dwelling prices will fall 2% over the 2022 calendar year, followed by an 8% fall in 2023 and 1% in 2024.

Domain's quarterly house price report also shows housing values declined in Melbourne and Canberra 0.9% and 0.7% respectively, while Sydney plateaued - up 0.2%.

Brisbane and Adelaide continued to steam ahead, up 3.1% and 3.0% over the quarter respectively.

ABS' lending data for February shows a decline in lending value, however, with owner occupier lending down 4.7% over the month and investor lending down 1.8% to $21.53 and $10.75 billion respectively.

Annually owner occupier lending was down 1.0% while investment lending was up 55.8%.


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Lender

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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 May 26, 2022. View disclaimer.


Photo by Little John on Unsplash

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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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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