Housing credit growth at fastest pace since 2008

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on January 31, 2022 Fact Checked
Housing credit growth at fastest pace since 2008

Across 12 months to December 2021, credit growth hit 7.2% recording its strongest annual growth in 13 years according to RBA data.

This result surpasses the four-year high reported from October

Westpac Senior Economist Andrew Hanlan said credit growth had not reached these heights since November 2008, prior to the impact of the GFC.

"This represents a dramatic acceleration from the anaemic 1.7% increase in 2020," Mr Hanlan said. 

Twelve-month housing credit grew to 7.4% in December, with owner-occupiers leading the charge recording an annual growth of 9.6% - again the strongest annual result since 2008.

For investors, twelve-month housing credit recorded annual growth of 3.4%.

Mr Hanlan said the housing sector has been in a brisk upswing, punctuated at times by lockdowns.

"This strength is in response to record low rates, the HomeBuilder program and a switch in demand as folk looked for more space at home," he said.

CommBank Senior Economist Belinda Allen said the recent rise in fixed rate loans for both owner-occupiers and investors as well as the growing expectations of official cash rate rises in 2022 should weigh on housing credit growth in the period ahead.

"Regulators will remain watchful of the pace of both new lending and the stock of credit, as well as lending at high debt to income ratios and loan to valuation ratios," Ms Allen said.
CBA forecasts credit growth to remain firm though housing credit could taper with the expected lift in the RBA cash rate in August 2022.

Personal credit falls

Personal credit fell by 0.8% in December and remains 3.8% below levels a year ago.

The fall in December comes after 0.6% gains were recorded in November. 

Ms Allen said although lending has lifted for holidays and cars in CBA lending data, households as a group have a significant pool of savings which has reduced the need to borrow.

"At this stage CBA card spend data has been encouraging during the Omicron outbreak, save the first two weeks of January but a degree of uncertainty could creep in for big ticket items that often require loans like cars, applications or holidays," she said.


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Image by Qimono via Pixabay.

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Jacob Cocciolone joined the Savings team in 2021 as a Finance Journalist. Driven by a passion for keeping Australians up to date with the latest financial news and trends, his areas of interest include financial technology, investing, property and motoring.

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