Economist flags surge in mortgage 'churn'

 The number of owner-occupied home loans increased 1.6 per cent in March, according to the Australian Bureau of Statistics (ABS), while the value of investor loans jumped 6.4 per cent.

Westpac senior economist Matthew Hassan noted that the lending surge is being boosted by strong refinance activity – rising 4.0 per cent in March following a 3.2 per cent gain in February.

Refinancing is up 21 per cent for the year, accounting for a record 37.6 per cent of all owner-occupier finance approvals, Mr Hassan noted.

“Excluding refinance, approvals are up just 0.3 per cent for the month and down 3.0 per cent for the year,” he said.

“With refinance effectively ‘churn’, the net figure is more meaningful for gauging credit growth overall and suggests this is still very muted for the owner-occupier segment.”

While investor loans came off the boil by 3.3 per cent last month, the gains in March now look to be misleading, Mr Hassan said, with the value of investor approvals up 20.9 per cent for the year.

“That in turn suggests little or no impact to date from macroprudential pressures aimed at containing lending growth to this segment, with these growth rates in new loans unlikely to be consistent with APRA’s 10 per cent guideline for growth in the total stock of investor loans, noting that system-wide investor credit growth is already tracking at 10.4 per cent for the year,” he said.

“The state breakdown of owner-occupier approvals showed broad gains across all the major states suggesting lower interest rates were a common positive factor in the month.”