Loans get smaller as credit crunch hits
Mortgage lending in Australia slowed in November given falling house prices.
Westpac noted the detail suggests the weakness apparent in dwelling prices late last year promoted the decline in investor loans and reduction in borrowing capacity.
The headline number of owner occupier loans was a touch firmer than expected, Matthew Hassan at Westpac suggested.
Total dwelling finance declined 2.5 percent over November, according to the latest figures from the ABS.
The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 18.3% in November 2018 from 18.1% in October 2018.
The weakness was concentrated in the investor loans and the value of owner occupier loans.
Hassan said the headline number of owner occupier loans was a touch firmer than expected, recording a 0.9% decline vs expectations of a 1.5% fall and down only 0.6% ex refi.
"Despite this slightly better than expected complexion on the number of owner approvals in the month, weakness is still clear with the approvals ex refi down 10% over the last 12mths," Hassan said.
"The detail suggests the weakness apparent in dwelling prices late last year relates to the decline in investor loans and reduction in borrowing capacity.
"Notably, the six months to Nov saw a 5.8% drop in the value of owner occupier loans but just a 1.5% decline in the number of loans, the difference being the implied average loan size.
The value of investor loans dropped 4.5% to be down 23.4%yr to the lowest level since June 2013.
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APAC economist at Indeed Callam Pickering says "first-home buyers are the only thing standing between house prices, mortgage lending and complete capitulation."
The data showed that between October 2018 and November 2018, the average loan size for first home buyers fell $2,400 to $336,500.
The average loan size for all owner occupied housing commitments fell $1,600 to $384,700 for the same period.
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Alex Joiner, economist at IFM, said it will be interesting to see if banks will ease on their lending criteria.
"Interesting to observe whether the Council of Financial Regulators, RBA & others recent plea to the banks to ease up on tighter credit will put a floor under mortgages or is it more a demand story and buyers are content to wait for further declines yet," he tweeted.
Investor approvals continued to dip over the month.
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The November 2018 housing finance figures, in trend terms showed the number of owner-occupied finance commitments decreased by 0.2 per cent – the fourteenth consecutive month of decreases.
“In trend terms decreases were recorded in Victoria, New South Wales and Queensland," according to the Real Estate Institute of Australia (REIA) President Adrian Kelly said.
The largest decrease of 0.7 per cent was in New South Wales.