A 5.3% fall in January notched the 12 consecutive decline in Australian housing finance commitments, sliding to 35% below their cycle peak. The effects of rising interest rates, tightened loan serviceability criteria and falling housing prices are weighing heavily on conditions and sentiment.
Housing Finance — January | By the numbers
- Housing finance commitments (ex-refinancing) declined 5.3% in January to $22.1bn, down 35% on their cycle peak from a year ago.
- Owner-occupier commitments were 4.9% lower in the month at $14.7bn (-35.1%yr).
- Investor lending posted a 6% fall to $7.4bn (-34.8%yr).
- Refinancing was down 2.1% in January but is just off record highs at $18.6bn, up 22.5% over the year.
Housing Finance — January | The details
The decline in housing finance commitments extended to a 12th consecutive month after a 5.3% fall in January. The peak-to-trough fall currently stands at 35%, with further weakness likely. Housing finance started to fall ahead of the RBA's tightening cycle, which commenced in May-22.
In the owner-occupier segment, lending continued to contract across all borrower types. First home buyer lending is at its lowest level since the middle of 2019, with loan volumes at a near 6-year low. Construction-related lending hit its lowest level since August 2019, though in volume terms commitments have slid to a 14-year low.
Investment lending is around 35% below its cycle peak in March-22, with its decline starting slightly later than the owner-occupier segment.
The panel charts below show the weakness is broad-based across the major segments in all states.
Despite easing in the past couple of reports, refinancing activity remains elevated in a rising interest rate environment. This has been driven by owner-occupiers; refinancing to the segment is up 29.3% over the year compared to a 10.2% rise from investors.
Housing Finance — January | Insights
The slide in lending over the past year (35%) has come alongside a correction of around 9% in housing prices nationwide, based on the latest data from CoreLogic. Further weakness is likely for both with the RBA still hiking rates and the full impact of the tightening cycle yet to impact.