The RBA Credit Aggregates for July 2017 have been released. Overall credit rose by 0.5% in the month, or 5.3% annualised. Within that housing lending grew at 0.5% (annualised 6.6% – well above inflation), other Personal credit fell again, down 0.1% (annualised -1.4%) and business credit rose 0.5% (annualised 4.2%).
Home lending reached a new high at $1.689 trillion. Within that owner occupied lending rose $7 billion to $1.10 trillion (up 0.48%) and investor lending rose just $0.09 billion or 0.15% to $583 billion. Investor mortgages, as a proportion of all mortgages fell slightly.
The adjusted movement data shows that investor housing is still at around 7%, higher than owner occupied loans and still way too high. Personal credit continues to languish, while business lending remains at around 4%. All growth rates for the financial aggregates are seasonally adjusted, and adjusted for the effects of breaks in the series
The more volatile monthly data shows a slight easing in housing credit growth this month, and a fall this month in business lending.
The RBA notes that:
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 $56 billion over the period of July 2015 to July 2017, of which $1.4 billion occurred in July 2017. These changes are reflected in the level of owner-occupier and investor credit outstanding. However, growth rates for these series have been adjusted to remove the effect of loan purpose changes.
So more adjustments, either from mis-classification, or borrowers proactively switching from investment loans to get better rates. This rate of switching has not slowed down, so it looks like a continuing process rather than a clerical error.
We suspect non-banks are picking up some of the investor lending slack as ADI’s conform to the regulators guidance. A quick calculation, comparing RBA and APRA data provides some validation:
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