Lending Still Well Behind 2022 Despite Surge

New loan commitment surged last month but remains well behind last year’s, according to the latest data from the ABS.

The value of new loans for housing rose 4.9 per cent to $24 billion in March, 2023.

New owner-occupier loan commitments rose 5.5 per cent to $16 billion, while new investor loan commitments rose 3.7 per cent to $8 billion.

But ABS head of finance statistics Mish Tan said the new owner-occupier loans in March remained 25 per cent lower compared to the same time last year, while new investor loan commitments were 29 per cent lower.

The number of new owner-occupier first home buyer loan commitments rose 15.8 per cent last month (seasonally adjusted), after reaching a five-year low in February.

Dr Tan said this was 22 per cent lower compared to a year ago.

“During the second half of 2020, first home buyer lending reflected the strength in demand for housing during the pandemic, with new commitments peaking in January 2021 and declining by half since then,” Tan said.

The value of new owner-occupier housing loan refinances between lenders rose 3.9 per cent to another record high of $14.2 billion in March 2023.

▲ Rising rents have pushed more first-home buyers into the market, according to BIS Oxford Economics senior economist Maree Kilroy.

Borrowers continued to switch lenders for lower interest rates as the RBA’s cash rate rose.

The value of total new loan commitments for fixed term personal finance fell 3.1 per cent, while lending for vehicle purchases rose slightly by 0.7 per cent.

BIS Oxford Economics senior economist Maree Kilroy said the strong run-up in rents across the country was encouraging more first home buyers into the market, while the First Home Buyer Choice scheme was adding support in NSW, which rebounded 18 per cent in March.

“A stabilisation in house prices has emerged over recent months with interest rates nearing the peak helping to reduce buyer uncertainty,” she said.

“History suggests that once the direction of prices turns positive, it holds. That is, you don’t see a second run down in prices. However, we are not in a typical cycle.”

HIA chief economist Tim Reardon said the data confirmed that “ongoing and significant declines in new home sales will see new home commencements slow significantly in the second half of 2023, under the weight of the higher cash rate”.

“There are very long lags in this cycle and the full impact of the RBA’s rate increases are still to fully hit the housing market, let alone the broader economy,” he said.

“The weak lending figures observed by the ABS in March will not be apparent in other economic indicators until 2024, when the volume of homes under construction declines more markedly.

“Given these long lags, the RBA shouldn’t be waiting to see unemployment rising before pausing the increase in the cash rate.”

Meanwhile, the RBA released its Statement of Monetary Policy for the quarter, its assessment of current economic conditions and the prospects for inflation and output growth.

It said inflation has passed its peak in Australia, but remained very high, and that the board was “determined to do what is necessary to return inflation to the 2 per cent to 3 per cent target”.

“Unemployment is around a 50-year low, but is expected to start rising later this year as economic growth slows,” the statement said.

“Wages growth is increasing and is in line with inflation returning to target, as long as productivity increases, while consumer spending has slowed as higher interest rates and cost-of-living pressures weigh on budgets, but the outlook is uncertain.”