Australian housing finance commitments fell to a 2-year low in November as declining housing prices and rising interest rates continued to weigh on activity. Refinancing accelerated driving the level up to a new record high.
Housing Finance — November | By the numbers
- Housing finance commitments (ex-refinancing) fell by 3.7% for the month in November to $24.7bn. Commitments have fallen by 24.3% over the past year.
- Owner-occupier commitments declined by 3.8% to $16.4bn (-24.8%yr), their lowest value since the onset of the pandemic and down 24.8%yr.
- Investor commitments posted a 3.6% fall to $8.3bn (-23.2%), a low stretching back to April 2021.
- Refinancing elevated to a new record high level ($19.5bn) after rising by 8.2% in November (20.4%yr).
Housing Finance — November | The details
The effects of rising interest rates, tighter loan serviceability criteria and declining housing prices saw the value of newly written housing finance commitments fall to a 2-year low in November. Commitments were down for the 10th month in succession and are now 26% below the peak seen in January 2022.
Commitments to the owner-occupier segment fell by 3.8% over the month, sliding back to mid-2020 levels. Lending across all borrower types remained on the slide (see summary table above). A 6.5% fall accelerated the decline in construction-related lending, its most sizeable decline in more than a year. Although cost pressures in residential construction could be easing, rising interest rates look more likely to be the decisive factor in this renewed weakness, particularly as loan volumes also fell sharply (-6.5%m/m).
In the investor segment, commitments fell for the 8th month running to bring the level down to 26.7% below the cycle peak ($11.3bn in Mar-22). That is a steeper unwind than seen for owner-occupiers (-25.8% from its peak) despite that segment starting its descent earlier in 2022 and ahead of the first RBA rate rise.
Amid an aggressive RBA rate hiking cycle, refinancing has reset to a new record high as borrowers switch lenders to obtain more competitive rates. The value of refinancing elevated through $19bn for the first time, up 20.4% on a year ago and 13.5% above their level in May when the first RBA rate rise for the cycle occured.
Housing Finance — November | Insights
Today's report was consistent with previous editions over recent months reflecting cooling conditions in housing markets across Australia. Declines in housing prices continued in December while the RBA continues to indicate that it expects to lift rates further.
