Housing credit in Australia recorded 4.8% growth for the 2023 calendar year, well down on 2022’s 12-month growth rate of 7.7%.

It seems higher interest rates have played their part in slowing the pace of housing credit growth from its 2022 peak.

Investor housing credit growth slows

Australia’s largest home lender, Commonwealth Bank of Australia, said softer investor housing credit growth has dampened overall housing credit numbers.

Investor housing credit rose 0.2% over the month of December, its rough average over the past 18 months. Annual growth in investor housing credit sits at 2.9%.

Owner-occupied housing growth has been stronger with its 0.4% rise for the month.

CommBank said first-home buyers have been outpacing other segments for new lending.

The bank is forecasting housing credit to remain around its current growth rate this year before rising in 2025, boosted by a Reserve Bank of Australia rate cut cycle.

Interest rate tipped to stay on hold next week

All big four banks are confident there will be no interest rate rise when the RBA board holds its first meeting for 2024 over two days on Monday and Tuesday next week.

This has been bolstered by the latest Consumer Price Index figures, released on Wednesday, showing Australia’s headline inflation has fallen to an annual rate of 4.1%.

The data shows inflation in Australia is easing, with the CPI recording a modest 0.6% rise for the December quarter.

It’s the smallest quarterly rise since the quarter ending March 2021.

Trimmed mean inflation, which excludes volatile items, also fell from an annualised rate of 5.2% in the September quarter to 4.2% to end the year.

Both inflation figures are well below the RBA’s forecasts of 4.5% for each.

In the 12 months to December, the monthly indicator showed inflation was just 3.4%, which CBA economist Stephen Wu correctly called back in November.

Drop in personal credit

Other figures released by the RBA today show personal credit fell 0.1% over December, matching the pace in November.

It recorded 1.2% growth during 2023 overall, up on 2022 when it fell 0.5%.

The 2023 figure is the strongest since May 2015 with the RBA noting personal credit was driven largely by car financing.

This had picked up as supply chains for new cars flowed more freely but looks to have peaked.

Meantime, credit for business also grew 0.5% in December, steady with the November figure.

Business credit finished the year at 6.6% annual growth, well down on the 2022 figure of 11.9%.

Overall private sector credit growth rose 0.4%, little changed in recent months.

Image by Brian Babb on Unsplash

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