Australian housing finance commitments declined by 4.1% in December ($26.3bn), their first decline in 5 months and their weakest result since November 2022. The decline reflected weaker loan volumes going through in the month; however, despite higher interest rates - including a 25bps hike in November - banks' mortgage books expanded further during the quarter as demand remained underpinned by population growth. This has driven commitments to an increase of 15% from their cycle low in early 2023, while capital city housing prices are up by 10% over the year, according to CoreLogic.
Housing finance commitments fell for the first time in 5 months, declining 4.1% in December to $26.3bn. A 5.6% decline in owner-occupier commitments ($16.8bn) was the segment's sharpest month-on-month fall since the outset of the Covid pandemic. Meanwhile, the investor segment was down 1.3%m/m ($9.5bn), posting its first decline in 10 months.
December's decline came after increases of 7.3% in October and 0.7% in November, leaving the value of commitments up by 8.3% for the final quarter of 2023. Lending increased to both owner-occupiers (8.7%) and investors (7.7%) over the period.
In the owner-occupier segment, loan approvals in December fell by a little more than 8%m/m to upgraders and first home buyers. Construction-related approvals rose 1.2% but remain near 15-year lows. Through Q4, approvals increased across the board, consistent with rising demand for housing: upgraders 4.9%, first home buyers 9.4% and construction-related 5.4%.
Refinancing was down 1.6% overall in December, seeing a decline of 13.4% in the quarter. With many fixed-rate borrowers having refinanced, activity in this space retraced over the back half of the year.
