The latest data from the RBA showing the monthly credit aggregates shows that home lending continues to grow, in both the owner occupied and investment property arena. Non banks are more active. Total lending for housing was a seasonally adjusted $1541.2 billion, up $8.6 billion, or 0.56%. This equates to an annual rate of 7.3%, well above inflation, and income growth. Within that, lending for owner occupation rose $7.6 billion, or 0.77%, whilst lending for investment property rose $1.0 billion or 0.19%.
Investment housing comprised 35.7% of all loans outstanding, a small fall from last month, but still a large number and higher than it should be.
Business lending rose 0.71% or $5.9 billion, to $844 billion, and comprises 33.4% of all lending, still lower than the 34.3% in 2013. So the slew towards lending for housing still remains. This equates to 6.5% annual growth.
Banks still prefer to lend for housing than to productive businesses.
Personal credit hardly moved, with a small fall of 0.37%, to $145.4 billion.
The normal caveats apply with regards to the home lending data, with $1.9 billion of adjustments made in February. “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 $37.3 billion over the period of July 2015 to February 2016 of which $1.9 billion occurred in February. 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”.
We will discuss the APRA monthly banking data in our next post. But according to APRA, total lending to the banks for housing was $1,432 billion, so the rest – $109.4 billion is the non-bank sector, and this represents a 1.38% rise (up $1.49 billion) compared with last month. So one important observation is the non-bank sector is now growing their mortgage loan books faster than the banks. This is a worrying sign.
