$1.3b of loans reclassified as housing credit grows 6.6%

The RBA financial aggregates for June 2017 report that overall housing credit is up by 6.6 per cent over the year, with a monthly increase of 0.5 per cent in May 2017. Additionally, business lending grew by 0.9 per cent month-on-month, bringing the year-on-year growth to 4.4 per cent.

The RBA financial aggregates are informed by figures from the Australian Bureau of Statistics, the Australian Prudential Regulation Authority (APRA) and the RBA’s own figures.

In monetary terms, home lending grew to $1.682 trillion, made up of $1.099 trillion in owner-occupier housing and $582 billion in investor lending, while $1.3 billion of loans were reclassified.

According to the RBA, $1.4 billion of loans were reclassified in May, $1.1 billion in April and $1.2 billion in March, and $1 billion of switching occurred in January and February apiece, marking a total of $7.2 billion in reclassified loans in the 2017 calendar year.

In a UBS report released this week, author Jonathan Mott said that a muted slowdown in total housing lending of around 0.50 per cent or 0.55 per cent each month, compounded by record low levels of first home buyers entering the market, implied that owner-occupied lending was “filling the gap” left by slowing investor lending.

Last month, banking analyst Martin North raised similar concerns, arguing that high rates of loan reclassification could be a case of investors being “flexible with the truth”.

The RBA, noting the rate of loan reclassification, said: “Following the introduction of an interest rate differential between housing loans to investors and owner-occupiers in mid-2015, a number of borrowers have changed the purpose of their existing loan; the net value of switching of loan purpose from investor to owner-occupier is estimated to have been $55 billion over the period of July 2015 to June 2017, of which $1.3 billion occurred in June 2017.

“These changes are reflected in the level of owner-occupier and investor credit outstanding.”

APRA figures

Meanwhile, APRA’s monthly banking statistics for June, released 31 July, reveal that overall housing lending grew to $1.57 trillion, reflecting a growth of 0.63 per cent month-on-month. Within that, owner-occupied loans made up $1.02 trillion (growing 0.73 per cent month-on-month) and investor loans made $552 billion, reflecting monthly growth of 0.44 per cent.

Measuring annually, owner-occupied loans are 6.9 per cent higher, while investor loans are 4.8 per cent higher.

CBA owner-occupied lending grew to $277,321 million from $276,674 million in May and investment lending fell slightly to $138,739 million from $139,283 in May.

ANZ posted an owner-occupied lending portfolio of $164,972 million and an investment portfolio of $82,765 million.

Meanwhile, NAB marked $141,449 million in owner-occupied loans and $103,393 million in investor lending, and Westpac noted an owner-occupied portfolio of $241,337 million and an investment portfolio of $146,813 million.

Together, the four major banks comprised $1.297 trillion of home lending.

[Related: Foreign banks could fall under bank levy, warns APRA]