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Australia: home loans fell for 3rd straight month

Australia: home loans fell in April for third straight month

Demand for housing finance fell for the third straight month in April. The number of home loans issued declined 3.0%m/m (JPMorgan -3.0%, consensus -2.0%) after slumping a revised 5.7% in March (previously 6.1%).

The number of home loan commitments has remained weak in the wake of the RBA's back-to-back rises in interest rates in February and March, and the rise in domestic banks' standard variable loan rates by more than, and outside of, the rise in the official cash rate.
The home loans data was mixed. Falls were recorded in the number of loans issued for the purchase of established dwellings (-3.5%) and the purchase of new dwellings (-1.3%), while loans for the construction of dwellings rose (+1.8%). The number of owner-occupied housing commitments excluding refinancing slumped 5.8%, compared to 5.4% in March.

In value terms, home loans were also lower, falling 3.0%m/m, owing to a 4.9% fall in owner-occupied lending. Surprisingly, given that investors appeared to have withdrawn from the property market in recent months, investment lending rose 1.4%, and investors accounted for 31% of total loans, the largest proportion since October last year, and notably higher than the 29% recorded in the previous month. First home buyers, though, continue to suffer amid record low levels of housing affordability, and accounted for less than 17% of home loans in April.

Demand for home loans will probably remain weak near term. Not only are borrowing costs high, but petrol prices are rising, and prices for food and other staple goods remain elevated. There is also a risk that domestic banks may raise their standard variable rates again outside of changes in the official cash rate which, given that variable loans account for around 80% of all loans, would weigh heavily on demand for housing finance.

The details:

• The value of commitments fell 3.0%, with owner occupied housing commitments falling (-4.9%) and investment housing commitments rising (+1.4%).

• Fixed rate loans as a percentage of all dwellings financed stood at 17.5%, the lowest level since August 2007, and well down from the 23.9% recorded in March.

• The number of commitments for owner-occupied housing finance fell 3.0%, compared to a 5.7% decline in March.

• The number of home loans fell in all states and territories, excluding the Northern Territory (+13.7%) and South Australia (+2.7%).

See... full release with charts (PDF)

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