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The latest stats — here’s what’s happening in our mortgage markets

Housing finance commitments to owner occupiers are trending higher as commitments to investors trend lower.

There was $33.5 billion in housing finance commitments in February 2018 to Australian lenders.

Mortgage Repayment Credit CardThe total value of housing finance commitments increased by 1.0% in February 2018 and was 2.1% higher year-on-year.

The $33.5 billion in commitments was split between $21.5 billion to owner occupiers and $12.0 billion to investors.

The value of owner occupier housing finance commitments (including refinanced loans) increased by 1.3% over the month and was 7.2% higher year-on-year.

Finance commitments to investors increased by 0.5% in February however, they were -5.9% lower year-on-year.

The ongoing changes to lending policies for investors has led to less mortgage activity across this segment however, stamp duty concessions in NSW and Vic for first home buyers and low interest rates continues to support demand from the owner occupier segment.

 

A1

The value of lending to owner occupiers is trending higher

In February 2018, the $21.5 billion in owner occupier housing finance commitments was split between: $2.0 billion for construction of dwellings, $1.2 billion for purchase of new dwellings, $6.5 billion for refinancing of established dwellings and $11.8 billion for purchase of established dwellings.

Owner occupier lending has been rising on the back of increases in lending for all sectors over the past year except for refinances.

Year-on-year, finance commitments were higher for construction of dwellings (+6.4%), purchase of new dwellings (+28.1%), refinancing of established dwellings (+6.5%) and purchase of established dwellings (+6.0%).

A2

Lending to investors is well below its peak but significantly higher than long-term levels

In February 2018 there was $12.0 billion in housing finance commitments to investors, consisting of $1.2 billion for construction of dwellings and $10.8 billion for established housing.

Lending for construction of dwellings rose over the month (+9.1%) and year (+18.0%) while lending for established dwellings fell over the month (-0.4%) and year (-8.0%).

investor-enquiry-form

The value of investor housing finance commitments had been easing on the back of higher mortgage rates to investors and other policy constraints restricting lending to this segment.

As at February 2018, the value of investor housing finance commitments was -17.8% below its historic peak.

Although the value of lending to investors has fallen, investors accounted for 44.5% of the total value of new finance commitments (excluding refinances) in February which was well above the long-run average share of 34.3%.

New South Wales and Victoria have seen heightened levels of investor borrowing over recent years with New South Wales’ much higher than Victoria’s level, and the recent increases in mortgage rates to investors, as well as tighter lender credit policies, are most likely to impact on demand within those markets where investors have been most active.

A3

Owner occupier first home buyer finance commitments have surged higher over recent months

Data on owner occupier housing finance commitments to first home buyers shows that there were 8,782 commitments in February 2018.

Paying Off Your Mortgage EarlyAlthough February is a seasonally slower period of the year, the volume of commitments were 4.8% higher over the month and 33.1% higher than at the same time last year.

A big driver of the rebounding first home buyer numbers has been the removal of stamp duty for first home buyers under certain price thresholds in NSW and Vic from July 1, 2017.

Comparing the number of first home buyer commitments to last year across the states shows volumes are higher in NSW (+103.3%), Vic (+38.6%), Qld (+3.8%), SA (+17.8%), Tas (+2.2%), NT (+26.8%) and ACT (+177.7%) and are lower in WA (-0.1%).

A4

Owner occupier average loan sizes have eased over recent months but are higher over the year

The average new mortgage size to owner occupiers was recorded at $382,200 in February 2018.

Average mortgage sizes have fallen over the each of the past two months however, they are 8.1% higher year-on-year.

First home buyer average loans sizes are $327,700 and have increased by 6.1% over the year.

Non-first home buyer average loan sizes sit at $394,100 and have increased by 9.3% year-on-year.

A5

The majority of owner occupiers take out a variable rate mortgage

Housing finance data reveals that in February 2018, 14.4% of owner occupier mortgage commitments were for fixed-rate loans.

Fixed Rate LoansAt its absolute peak, in March 2008, approximately one quarter of mortgages were on a fixed rate.

Variable rate mortgages are clearly preferred by Australian owner occupiers, again this data is not published for investors.

The falling proportion of new mortgages on a fixed rate is likely reflective of the fact discounted variable mortgage rates are cheaper than fixed rates and mortgage rates are expected to remain low for some time.

The majority of mortgages being on a variable rate means that when the RBA change the cash rate setting or lenders adjust mortgage rates, it has an almost immediate impact on household finances.

A6

Interest-only lending is comprising a much smaller proportion of new mortgages

The Australian Prudential Regulation Authority (APRA) reported that over the December 2017 quarter there was $15.272 billion in new interest-only mortgage lending.

Interest Only Lending Australia PropertyThe $15.272 billion in new interest only lending was an historic low (data is available from March 2008).

The $15.272 billion of new lending for interest-only purposes represented an historic low of 15.2% of total new lending and is much lower than its peak of 45.6% of lending in June 2015.

APRA has regulated that lenders can’t lend more than 30% of total new lending to interest-only purposes.

Although there was no real rebound in interest-only lending over the quarter some lenders have started reducing mortgage rates for interest-only products which could lead to a bit of a rebound over the coming quarters.

A7

The annual change in investor housing credit has slowed substantially over the past year

The total value of outstanding mortgage credit, according to the RBA, was $1.74 trillion in February 2018, with the value outstanding having almost doubled over the past decade.

Housing credit advanced by 0.5% in February with investor credit (0.2%) advancing at a slower pace than credit to owner occupiers (0.7%).

Over the month, both owner occupier and investor credit recorded an acceleration in their expansion.

A8

Over the 12 months to February 2018, housing credit has advanced by 6.2% which was its slowest growth since May 2014.

Owner occupier housing credit increased by 8.1% over the year to February 2018, its fastest rate of expansion since November 2016.

Investor credit expanded by 2.8% over the year, its slowest rate of annual growth since October 2016.

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About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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