Owner-occupier mortgage demand outpaces demand from investors: Westpac

Demand for mortgages from property investors has tracked significantly below that of owner-occupiers over the past three months, Westpac has highlighted following the release of October credit statistics by the Reserve Bank. 

Westpac senior economist Andrew Hanlon says the current three-month pace of investor credit growth is just 4.1% annualised compared with 6.1% for owner-occupiers. 

“Weakness of the investor market is notable,” he says.

Source: Westpac

He also expressed surprise that housing credit advanced by just 0.4% in October, down from growth of 0.5% in September, with overall credit growth for October at just 0.2%. 

“New lending, housing finance, has improved a little of late… The RBA cut rates in November. This points to some improvement ahead,” he says. 

“That said, housing finance remains at a relatively low level and housing credit growth is weak by historical standards.” 

Over the past 12 months housing credit growth has moderated to 5.7% currently from 7.4% a year ago, while personal credit has weakened (-1.4% from +2.2%) and business has credit stabilised (+0.7% following -3.0%). 

“Recall that for June 2011, the rise in housing credit of 0.35% was the weakest (nominal) monthly rise in the history of the series (back to 1976), with the exception of just July 1984. This highlights the headwinds facing the sector.” 

CBA economist James McIntyre noted that while total housing credit remains 5.7% higher than a year ago, this growth is the weakest in the 34 years of available data. 

“Overall growth in household credit (housing plus other personal) is growing at a 4.8% annual pace, well below growth in household incomes,” he says. 

Hanlon says further rate cuts (Westpac is forecasting another 75 basis points to be shaved off the cash rate over the next 12 months) will provide some relief to the housing market. 

“That points to a firming of general economic conditions and credit growth from around mid-2012,” he says.