Lending falls amid refinancing boom

Following 2022’s central bank cash-rate hikes, owning property is looking slightly less enticing now — and large numbers of those with it are doing all they can via refinancing to keep it, the latest November Australian Bureau of Statistics (ABS) lending data has uncovered.

In analysing new borrower-accepted finance commitments for housing, personal and business loans in November last year, when seasonally adjusted, it found new loan commitments dropped 3.7 per cent for housing; slipped 1.3 per cent for personal fixed term loans; tumbled 62.1 per cent for business construction (a typically volatile series), and fell 1.7 per cent in trend terms; plus dipped 0.7 per cent for business purchase of property (a typically volatile series), and thus fell 1.6 per cent in trend term, the ABS revealed.

Specifically for housing finance, the data showed last November, when seasonally adjusted, the value of new loan commitments: total housing fell by 3.7 per cent to $24.7 billion, following a 2.8 per cent fall in October. It was 24.3 per cent lower compared to a year ago; owner-occupier housing fell 3.8 per cent to $16.4 billion and was 24.8 per cent lower compared to a year ago; and investor housing fell 3.6 per cent to $8.3 billion and was 23.2 per cent lower annually, comparatively.

For those currently holding mortgages, the refinancing boom widely documented within the industry has tangibly manifested via the latest ABS lending data, which in seasonally adjusted November figures for the value of external refinancing jump 8.2 per cent to an all-time high of $19.5 billion for total housing. Annual comparison means this was 20.4 per cent higher.

For owner-occupier housing, refinancing rose 9.1 per cent to an “all-time high” of $13.4 billion, making it 27.1 per cent higher compared to a year ago.

Investor housing also rose 6.3 per cent to $6.1 billion and was thus 7.8 per cent higher compared to last year’s figure at this time.

In terms of business finance for property, this figure fell 0.7 per cent, after a fall of 4.1 per cent in October. In trend terms, it fell 1.6 per cent, the ABS found.

First home buyers in focus

For those attempting to get onto the property ladder for the first time, in seasonally adjusted terms, owner-occupier first home buyers’ new loans fell by 5.5 per cent to 8,023 nationally, following a 3.3 per cent fall in October.

As the ABS highlighted, the November level was 50.7 per cent below the January 2021 high of 16,261.

A state-by-state breakdown of data showed that in Victoria, new loan commitments fell by 6.1 per cent; NSW (5.9 per cent); Queensland (5.1 per cent); Western Australia (5.7 per cent); ACT (16.3 per cent); South Australia (3.9 per cent); and in the Northern Territory, it dropped by 14.9 per cent. Interestingly, in Tasmania, the trend was bucked and rose by 16.4 per cent, though the ABS explained that the Tasmania, Northern Territory and ACT series are smaller and can have more volatile month-to-month movements.

Lagged results as probable February rate rise looms

The full impact of 2022’s (at the time) seven rate rises is still to be felt as a housing industry economist calls for the Reserve Bank (RBA) to “hold fire” so their actions can “play out”.

“There were only 5,057 loans for the construction or purchase of new homes in November, the weakest month since June 2013,” stated Housing Industry Association (HIA) economist, Tom Devitt. 

“This reflects the very well-broadcast housing downturn, with new housing loans over the 12 months to November 2022 down by 36.2 per cent on the preceding year,” added Mr Devitt.

“Investors and owner-occupiers alike, are retreating from the market. This contraction in lending occurred before the RBA increased the cash rate in December and we expect an ongoing decline in lending as the full impact of the increase in interest rates flows through to households.

“There are long lags inherent in this cycle and the full impact of the increase in the cash rate in 2022 will not be observed until late in 2023.

“The RBA has already undertaken the steepest hiking cycle in a generation, and it needs to hold fire on further hikes to give their actions to date time to play out.

“The RBA will not restore the economy to stable growth by putting the building industry through boom-and-bust cycles.

“As building activity slows in 2023, the RBA will be under increasing pressure to reverse course in the second half of this year,” concluded Mr Devitt.

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