Australian housing finance commitments posted a 3.4% fall in August, extending their decline from the peak at the start of the year to 17.5% as the adjustment to rising interest rates and declining housing prices continues to play out. At the same time, lending for refinancing has reached a new record high and has overtaken lending to owner-occupiers.
Housing Finance — August | By the numbers
- Housing finance commitments (ex-refinancing) fell by 3.4% in August to $27.4bn, broadly in line with expectations (-3.0%) following after a sharp decline in July (-8.5%). Commitments are down 12.5% over the year.
- Owner-occupier commitments contracted by 2.7%m/m to $18.5bn to be 15.1% lower than a year ago (prior: -7%m/m and -15.9%yr)
- Investor commitments were 4.8% lower at $8.9bn after falling 11.2% in July, leaving commitments down 6.4% over the year (from 0%).
- Lending for refinancing rose to a record high ($18.9bn) on the back of a 5.3% lift in August (9.8%yr).
Housing Finance — August | The details
Housing finance commitments fell for the third month running reflecting the effects of rising interest rates and declining prices in housing markets across Australia. August's 3.4% fall followed declines of 4.4% in June and 8.5% in July, seeing commitments down by 15.1% over this stretch and 17.5% off the peak in January.
Lending to the owner-occupier segment saw a 2.7% fall in August, running 15.8% below December's record high. Across the sub-categories, commitments to upgraders fell 2.8% while construction-related (-2.7%) and alteration lending (-6.2%) also declined. Going against the trend, lending to first home buyers posted a 7% rise, reportedly due to the government's expansion of the First Home Guarantee scheme, albeit this comes after an 18.5% fall over June-July.
Investment lending is falling at a sharp pace and is now down almost 24% from the peak in March. Lending to the segment saw broad-based falls across the states: NSW -4.9%, Vic -4.0%, Qld -2.7% and SA -9.6%, though both WA 3.0% and Tas 4.1% saw increases.
In a rising interest rate environment, refinancing commitments continue to climb and hit a new record high in August ($18.9bn). Indicative of the shift underway in the housing market, the value of refinancing commitments has overtaken owner-occupier lending for the first time since June 2020.
Housing Finance — August | Insights
The latest data from CoreLogic reported yesterday, housing prices continued to fall in September, down 1.4% on the month on the national index. This together with the pass-through from rising interest rates and their impact on loan sizes will lead to further declines in the housing finance series. It seems likely that refinancing activity will continue to rise.