Investment lending rises for the first time in a year

According to the latest Lending to Households and Businesses data from the Australian Bureau of Statistics (ABS), the total value of lending to households for investment purposes, more than $4.37 billion of loans were written in June 2019, up from $4.35 billion in May.

Further, the data showed that the value of home loan lending for investors increased by 0.5 per cent, the first monthly spike in investor finance commitments since July 2018.

The rise in new lending commitments for investment dwellings was driven by the first rise in NSW since April 2018 (up 2.4 per cent).

Speaking of the figures, senior economist at the Housing Industry Association (HIA) Geordan Murray noted that while investor lending was up for the first time in nearly a year, investor lending “remained soft and is 18.7 per cent below the level recorded in early 2017”.

“The absence of investors has provided first home buyers with a less competitive environment, and more are taking advantage of this,” he added.

Indeed, the ABS figures showed that the overall rise in mortgage lending in June was largely driven by owner-occupiers.

The ABS data reported a 2.4 per cent increase to owner-occupier home lending, recovering from a 2.7 per cent drop in the previous month.

A vast majority (76.1 per cent) of owner-occupier lending was provided to those purchasing established homes, and the number of loans written for established dwellings increased 1.2 per cent on the previous month.

Additionally, the number of mortgages provided to first home buyers (FHBs) also increased by 2.1 per cent, making June the fifth month to see increased FHB lending in the first six months in 2019.

The HIA’s senior economist noted that the June lending results occurred in the same month as the first cut to the official cash rate by the Reserve Bank of Australia, but he said it was likely too close to the event for the results to show a significant effect.

“The first of the two interest rate cuts was announced on the first Tuesday of June. Given the lag between a loan applications and final approval, it is unlikely that the rate cut had a material impact on the figures released today,” Mr Murray said.

“In early July, the RBA cut rate for a second time, APRA finalised the changes to rules for assessing loan serviceability and the government passed cuts to personal income tax rates.”

“These developments should lead to more positive data as the year progresses.”

Overall, the total home loan approvals increased, in seasonally adjusted terms, by 1.3 per cent in June, following a fall of 1.6 per cent in the month prior.

However, Ben Dorber, director of financial statistics at the ABS, noted: “Consistent with recent house price movements, the decline in new lending commitments for dwellings has slowed in recent months."

[Related: Property market update: Sydney, July 2019]