New lending ‘well-above’ pre-pandemic levels despite higher rates

The latest Quarterly Authorised Deposit-taking Institution (ADI) Performance report released by the Australian Prudential and Regulation Authority (APRA) has revealed that new residential mortgage lending continued to grow, remaining well above pre-pandemic levels.

This is despite interest rates sitting at 4.35 per cent since the last cash rate increase in November 2023, up 0.25 per cent from June 2023 when the cash rate was lifted to 4.1 per cent.

The data, observing the quarter ended 30 June 2024, revealed that the credit outstanding on residential mortgages rose to $2.26 trillion, up by 4.2 per cent from the $2.17 trillion recorded in June 2023.

Owner-occupier loans made up the majority of the proportion of new residential mortgages at 67.7 per cent, at $1.51 trillion (up 4.8 per cent from $1.45 trillion the year prior), while investor loans rose to $676 billion (making up 30.3 per cent of all loans), up 4 per cent from $650 billion.

The proportion of owner-occupier loans rose slightly year on year, up by 0.2 per cent from 67.5 per cent, while investor loans declined by 0.1 per cent from 30.4 per cent.

APRA’s data further showed that mortgage arrears of 30–89 days past due rose slightly to 0.7 per cent from 0.5 per cent a year prior, while non-performing loans rose to 1 per cent from 0.8 per cent.

In addition, the six times debt-to-income ratio decreased during the June quarter 2024 to 5 per cent, down from 6.1 per cent in June 2023.

Despite the rise in non-performing loans, APRA determined that overall asset quality “remained sound” during this quarter.

Meanwhile, APRA revealed that commercial real estate lending growth “increased marginally”, largely driven by continued demand for industrial property and a recovery in retail property; however, the overall growth rate remained subdued.

Total commercial property limits rose to $455.6 billion (up 3.6 per cent from $439.9 billion), while non-performing commercial real estate exposures were “broadly stable at low levels”, rising by 4 per cent from $405.5 billion to $421.9 billion during the quarter.

Net profit after tax (year end) for Australia’s banks showed a decline of 6.7 per cent, down to $39 billion from $41.8 billion a year prior; however, APRA determined that ADIs are “well-capitalised despite a slight decline in capital ratios over the quarter”.

“Capital levels remain near all-time highs, well above the unquestionably strong benchmarks,” the report said.

“Stagnating income growth caused a slight decline in profitability, with further headwinds over the near term.

“Despite some signs of easing toward the end of the quarter, competition remained elevated. ADIs completed the final repayments of the Term Funding Facility smoothly, and liquidity levels remained well above regulatory minimums.”

Since this quarter, the pace of growth in the loan books of Aussie banks has experienced a slowdown, according to the latest monthly ADI stats from APRA.

During the month of July, the total loan book for ADIs across the country stood at $2.22 trillion, a rise of $6.77 billion (0.31 per cent) on June’s figure. When compared to the previous comparative period (May 2024 to June 2024), the pace of growth almost halved, falling from 0.7 per cent.

[RELATED: Aussie banks’ loan book growth dwindles]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.