Record home loans and mortgage size
¾ Home loans: The value of new loan commitments for housing rose by 5.6 per cent in November. Owner-occupier loans were up 5.5 per cent to a record high $18.34 billion. And investor loans were up by 6.0 per cent to 2-year highs of $5.61 billion. The number of owner-occupier first home buyer loan commitments increased 3.1 per cent in seasonally adjusted terms to an 11-year high of 13,905 (41.6 per cent of all loans).
¾ Record mortgage debt: The average Australian new home loan size to buy an existing home hit a record high of $528,800 in November. Mortgage sizes are at record highs in NSW, Western Australia and Tasmania.
Lending finance data has implications for banks, retailers, developers, building and building material companies.
What does it all mean?
· Housing activity across Australia is buoyant, supported by record low mortgage rates and government policy initiatives. Home prices are lifting, new home sales have hit decade highs and increasing numbers of young Aussies are committing to home ownership. New housing loan approvals hit record highs in November with the easing of lockdown restrictions in Victoria (up 19.6 per cent) further driving up home loan demand.
· Sentiment towards the housing market is strong. In fact, a record 67 per cent of the 20,353 respondents to comparison website Finder’s Consumer Sentiment Tracker survey in December said now is a ‘good time to buy’ a property. And the ‘time to buy a dwelling index’ in the Westpac-Melbourne Institute consumer confidence gauge for December was just below the 7-year high reached in previous month.
· Of course, owner-occupiers are particularly sensitive to fluctuations in housing affordability. While the Covid-19 housing recovery is well underway – pushing up house prices in particular – first home buyers are still keen on home ownership. A recent survey by broker Mortgage Choice found that 45 per cent of respondents are ‘more likely to purchase a home now’. The number of owner-occupier first home buyer loan commitments increased 3.1 per cent in seasonally adjusted terms to an 11-year high of 13,905 (41.6 per cent of all loans).
· And loans to build new homes are up a massive 99 per cent on a year ago, courtesy of the Federal government HomeBuilder scheme, various state government incentives and super-low interest rates. Good news for home builders!
What do the figures show?
Lending – November
· The value of new loan commitments for housing rose by 5.6 per cent in November. Owner-occupier loans were up 5.5 per cent to a record high $18.34 billion. And investor loans were up by 6.0 per cent to 2-year highs of $5.61 billion. The adjacent table has details of lending per category.
· The value of owner-occupier first home buyer loan commitments rose by 4.3 per cent to be up 46.7 per cent on the year.
· The value of first home buyer loan commitments accounted for 31.1 per cent of all owner occupier commitments (excluding refinancing) in November – easing from 11-year highs of 31.5 per cent in October.
· The number of owner-occupier first home buyer loan commitments increased 3.1 per cent in seasonally adjusted terms to an 11-year high of 13,905 (41.6 per cent of all loans).
· Personal finance fixed term loan commitments rose by 13.2 per cent in the month to be up 5.8 per cent on a year ago.
· Personal lending from revolving sources (including credit cards) rose by 19.2 per cent in November. Loans were down by 32.7 per cent over the year.
· New finance leases fell by 9.3 per cent in the month. Finance leases were down 1.6 per cent on the year.
· The value of new loan commitments to businesses for construction fell by 49.6 per cent in the month to be down by 62.1 per cent on the year.
· Loans for the purchase of property by business rose by 6.7 per cent to be down by 7.8 per cent over the year.
What is the importance of the economic data?
· “Lending Indicators” is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.
· The Australian Bureau of Statistics releases data on overseas arrivals and departures, produced monthly and is an indicator of the health of the tourism sector. The figures are also useful in understanding spending trends and tracking migrant numbers – an indicator with widespread implications for employment, housing and spending.
What are the implications for investors?
· It won’t be long until ballooning mortgage debt is again on the radar of Aussie policymakers. In NSW, Queensland, Western Australia and Tasmania the average mortgage size for an established home stands at record highs.
· The recovery in the motor vehicle market – which experienced strong sales volumes at the end of 2020 – has flowed through to personal loan approvals. Personal fixed-term loan commitments for the purchase of motor vehicles jumped 11.7 per cent in November to a 3-year high of $1,216.9 million.
Published by Ryan Felsman, Senior Economist, CommSec