Mortgages moving on up

Investors make most of relaxed rules, falling rates

MORTGAGES have again expanded in number and in size as property investors take advantage of relaxed affordability guidelines and falling interest rates.

The combined value of loans granted to housing investors and owner-occupiers grew by a seasonally adjusted 3.2 per cent in August to $33.47 billion – a slower pace than July – dragged down by softer than expected figures for owner-occupiers.

The value of home loans to owner-occupiers climbed by 1.9 per cent to $13.55 billion for the month, below the 3.0 per cent growth predicted, while the number of new owner-occupier mortgages excluding refinancing increased by just 0.7 per cent to 32,740, also falling short of an expected 2.3 per cent climb.

The value of investor loans, however, expanded by 5.7 per cent to $4.88 billion, handily beating predictions of a 3.0 per cent climb, yesterday’s figures from the Australian Bureau of Statistics showed.

Unlike owner-occupier lending, investor lending expanded on the previous month. The value and volume of lending remains subdued compared to a year ago in every category except for first-time owner-occupier homebuyers, where total loans jumped by 5.2 per cent to 9869 for August and are now up 8.0 per cent since August 2018.

Lending for refinancing climbed 7.7 per cent for the month to $10.1 billion, now up 6.7 per cent on a year ago.

Westpac’s Matthew Hassan said, while a mixed bag, the data was consistent with a clear turnaround in the housing market since the middle of the year. “The detail point(s) to a much more evenly balanced mix of gains across owner-occupier and investor segments,” Mr Hassan said.

Total mortgage lending surged by an unexpectedly large 5.1 per cent in July after the Australian Prudential Regulation Authority eased its serviceability requirements so banks no longer needed to ensure customers could still repay their loan at a 7.0 per cent interest rate. Instead, lenders can now set their own minimum rate floor and use a 2.5 per cent buffer, which the prudential regulator acknowledged could mean larger loans.

The Reserve Bank also twice lowered the cash rate in June and July, with the backto-back cuts bringing the rate to a record low 1.0 per cent.

JP Morgan’s Sally Auld said yesterday’s data was further evidence for the RBA that the first 50 basis points of easing was being transmitted to the broader economy via the traditional channels.