AdviserVoiceWeak home lending reinforces need for rate pause https://www.adviservoice.com.au/2010/12/weak-home-lending-reinforces-need-for-rate-pause/ Financial planner information & financial planner education/CPD - AdviserVoice Thu, 04 Jun 2026 21:30:42 +0000 en-US hourly 1 https://wordpress.org/?v=7.0 Weak home lending reinforces need for rate pause https://www.adviservoice.com.au/2010/12/weak-home-lending-reinforces-need-for-rate-pause/ https://www.adviservoice.com.au/2010/12/weak-home-lending-reinforces-need-for-rate-pause/#respond Wed, 08 Dec 2010 03:36:29 +0000 https://adviservoice.com.au/?p=4711 Housing finance
  • Lending to build new homes was flat in October. A key leading indicator for home construction barely moved in October – ahead of the November rate hike. Loans for the construction of dwellings rose by just 0.1 per cent in October – only the second increase in a year.
  • First home buyers exit. The proportion of first home buyers in the market hit six-year lows in October.
  • Home loans rose ahead of the November rate hike. Overall, the value of housing loans rose by 2.2 per cent in October with the number of loans to owner occupiers up 1.9 per cent. But the number of home loans is 20.6 per cent lower than a year ago.
  • Actual loans advanced hit 8-month lows: Lending commitments that were actually advanced in October hit eight month lows of $12.5 billion in October and were 17.6 per cent lower than a year ago.

What does it all mean?

  • Blind-sided by the Reserve Bank’s preoccupation on the terms of trade, some analysts can’t believe that the Australian economy barely grew over the September quarter. Still, if you run through all the evidence, probably the big surprise is that the economy grew at all. Key sectors of the economy such as services and manufacturing are going backwards and certainly the housing market is very much becalmed. And that clearly is in evidence with the latest home loans data.
  • For the home construction market one of the key forward-looking indicators is lending for construction of homes and apartments. And the latest news is not good. Lending grew just 0.1 per cent and this negligible increase was only the second monthly gain in a year.
  • It’s important to note that the latest home loan data is for October – that is, it precedes the double-whammy rate hike in November. The bottom-line is that lending for home construction was already weak ahead of the last rate hike. So an extended period of interest rate stability will be required to breathe life into the home construction market.
  • The number of loans to people wanting to live in homes, rather than invest in them, encouragingly grew in October. However the key question is how many budding buyers were merely attempting to lock in finance ahead of an expected rate hike.
  • What is being measured in the home loan data is new commitments made to borrowers. But while a lender may make a commitment, the borrower may end up not proceeding with the loan. That has certainly been happening in recent months with the value of loans actually advanced at eight-month lows. And given the double-whammy rate hike in November, there is a greater chance that budding buyers will let the lending commitment lapse.

What do the figures show?

Housing Finance

  • The number of new owner-occupier housing loans edged further away from 9-year lows in October, lifting by 1.9 per cent to 49,307 new commitments. The number of loans is 20.6 per cent lower than a year ago.
  • Loans for the construction of homes rose by just 0.1 per cent in October, only the second rise in 12 months. Loans for the purchase of established dwellings (ex refinancing) rose by 1.8 per cent, while loans for the purchase of newly erected dwelling rose by 9.4 per cent after falling by 2.6 per cent in September. Refinancing commitments were higher by 2.4 per cent.
  • Loans rose in five of the eight states and territories in October. Lending rose the most in Queensland (up 3.6 per cent) but fell most in Northern Territory (down 22.2 per cent). Loans also fell in Western Australia (down 0.9 per cent) and South Australia (down 0.8 per cent).
  • The value of new housing commitments (owner occupier and investment) rose by 2.2 per cent in October. Owner/occupier loans rose by 2.8 per cent while investment loans rose by 1.1 per cent.
  • The value of loan commitments actually taken up fell by 2.4 per cent in October to an eight-month low.
  • The proportion of first home buyers in the market hit a six-year low of 15.4 per cent of all lending in October – well below the record high of 28.5 per cent set in May 2009. Fixed rate loans accounted for 6.9 per cent of all loans, up from 4.4 per cent of loans in September and 3.4 per cent of loans in August. And the average home loan across Australia stood at $286,500, up 5.3 per cent on a year ago.

What is the importance of the economic data?

  • Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

What are the implications for interest rates and investors?

  • The latest figures on home lending further raise questions about the validity of the Reserve Bank rate hike in November. Still that is old news now. The important thing is that rates were kept on hold yesterday. And the good news is that the Reserve Bank Governor is signalling an extended period of interest rate stability. Certainly we believe that the RBA will need to stay on the sidelines until well into 2011 if budding home builders become more confident to advance their plans.

Produced by Commonwealth Research based on information available at the time of publishing. We believe that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To the extent permitted by law, neither Commonwealth Bank of Australia ABN 48 123 123 124 nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report.

The report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. In the case of certain securities Commonwealth Bank of Australia is or may be the only market maker.

This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399 a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia. This report is approved and distributed in the UK by Commonwealth Bank of Australia incorporated in Australia with limited liability. Registered in England No. BR250 and regulated in the UK by the Financial Services Authority (FSA). This report does not purport to be a complete statement or summary. For the purpose of the FSA rules, this report and related services are not intended for private customers and are not available to them.

Commonwealth Bank of Australia and its subsidiaries have effected or may affect transactions for their own account in any investments or related investments referred to in this report.

]]> Housing finance
  • Lending to build new homes was flat in October. A key leading indicator for home construction barely moved in October – ahead of the November rate hike. Loans for the construction of dwellings rose by just 0.1 per cent in October – only the second increase in a year.
  • First home buyers exit. The proportion of first home buyers in the market hit six-year lows in October.
  • Home loans rose ahead of the November rate hike. Overall, the value of housing loans rose by 2.2 per cent in October with the number of loans to owner occupiers up 1.9 per cent. But the number of home loans is 20.6 per cent lower than a year ago.
  • Actual loans advanced hit 8-month lows: Lending commitments that were actually advanced in October hit eight month lows of $12.5 billion in October and were 17.6 per cent lower than a year ago.

What does it all mean?

  • Blind-sided by the Reserve Bank’s preoccupation on the terms of trade, some analysts can’t believe that the Australian economy barely grew over the September quarter. Still, if you run through all the evidence, probably the big surprise is that the economy grew at all. Key sectors of the economy such as services and manufacturing are going backwards and certainly the housing market is very much becalmed. And that clearly is in evidence with the latest home loans data.
  • For the home construction market one of the key forward-looking indicators is lending for construction of homes and apartments. And the latest news is not good. Lending grew just 0.1 per cent and this negligible increase was only the second monthly gain in a year.
  • It’s important to note that the latest home loan data is for October – that is, it precedes the double-whammy rate hike in November. The bottom-line is that lending for home construction was already weak ahead of the last rate hike. So an extended period of interest rate stability will be required to breathe life into the home construction market.
  • The number of loans to people wanting to live in homes, rather than invest in them, encouragingly grew in October. However the key question is how many budding buyers were merely attempting to lock in finance ahead of an expected rate hike.
  • What is being measured in the home loan data is new commitments made to borrowers. But while a lender may make a commitment, the borrower may end up not proceeding with the loan. That has certainly been happening in recent months with the value of loans actually advanced at eight-month lows. And given the double-whammy rate hike in November, there is a greater chance that budding buyers will let the lending commitment lapse.

What do the figures show?

Housing Finance

  • The number of new owner-occupier housing loans edged further away from 9-year lows in October, lifting by 1.9 per cent to 49,307 new commitments. The number of loans is 20.6 per cent lower than a year ago.
  • Loans for the construction of homes rose by just 0.1 per cent in October, only the second rise in 12 months. Loans for the purchase of established dwellings (ex refinancing) rose by 1.8 per cent, while loans for the purchase of newly erected dwelling rose by 9.4 per cent after falling by 2.6 per cent in September. Refinancing commitments were higher by 2.4 per cent.
  • Loans rose in five of the eight states and territories in October. Lending rose the most in Queensland (up 3.6 per cent) but fell most in Northern Territory (down 22.2 per cent). Loans also fell in Western Australia (down 0.9 per cent) and South Australia (down 0.8 per cent).
  • The value of new housing commitments (owner occupier and investment) rose by 2.2 per cent in October. Owner/occupier loans rose by 2.8 per cent while investment loans rose by 1.1 per cent.
  • The value of loan commitments actually taken up fell by 2.4 per cent in October to an eight-month low.
  • The proportion of first home buyers in the market hit a six-year low of 15.4 per cent of all lending in October – well below the record high of 28.5 per cent set in May 2009. Fixed rate loans accounted for 6.9 per cent of all loans, up from 4.4 per cent of loans in September and 3.4 per cent of loans in August. And the average home loan across Australia stood at $286,500, up 5.3 per cent on a year ago.

What is the importance of the economic data?

  • Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

What are the implications for interest rates and investors?

  • The latest figures on home lending further raise questions about the validity of the Reserve Bank rate hike in November. Still that is old news now. The important thing is that rates were kept on hold yesterday. And the good news is that the Reserve Bank Governor is signalling an extended period of interest rate stability. Certainly we believe that the RBA will need to stay on the sidelines until well into 2011 if budding home builders become more confident to advance their plans.

Produced by Commonwealth Research based on information available at the time of publishing. We believe that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To the extent permitted by law, neither Commonwealth Bank of Australia ABN 48 123 123 124 nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report.

The report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. In the case of certain securities Commonwealth Bank of Australia is or may be the only market maker.

This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399 a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia. This report is approved and distributed in the UK by Commonwealth Bank of Australia incorporated in Australia with limited liability. Registered in England No. BR250 and regulated in the UK by the Financial Services Authority (FSA). This report does not purport to be a complete statement or summary. For the purpose of the FSA rules, this report and related services are not intended for private customers and are not available to them.

Commonwealth Bank of Australia and its subsidiaries have effected or may affect transactions for their own account in any investments or related investments referred to in this report.

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