The number of loans (commitments) by home owners (owner-occupiers) fell by 2.1 per cent in August. Loans are down by 10.2 per cent on the year – the biggest fall in 7½ years.

Owner-occupier loans fell by 2.7 per cent – the biggest fall in 2½ years - and investment loans fell by 1.1 per cent, a sixth successive decline. 

The average credit card balance fell by $5.90 to $3,217.82 in August, down from $3,223.73 in July and $3,278.35 in June. 

China’s international trade surplus rose by US$3.8 billion to US$31.69 billion (forecast: US$19.40 billion) in September. Over the year to September, exports rose by 14.5 per cent (forecast: +8.9 per cent) and imports increased by 14.3 per cent (forecast: +15.0 per cent). China’s imports from Australia rose by 2.9 per cent to US$8.8 billion.

Credit card data is important for the retail and financial sectors. The home lending figures have implications for builders, housing-reliant businesses, finance providers, retailers, and companies dependent on consumer and business spending. 

What does it all mean?

In its semi-annual update on the health of the Australian economy, the Reserve Bank said that a slowdown in Australia’s housing market is a “positive development for financial stability”. So policymakers will be pleased with developments so far, with home prices ‘normalising’ in Sydney and Melbourne and demand for loans from indebted home owners falling to 7½-year lows.

Overall, tighter lending conditions, increasing mortgage rates and falling home prices are impacting housing demand, inventory levels and home building. And loans for the construction of new homes plunged in August, confirming the recent declines in building approvals. But pockets of strength remain. Annual home prices are still up in Hobart, Canberra, Brisbane and Adelaide. In fact, home lending in Canberra increased during August.

While credit conditions have tightened, the Reserve Bank has refuted suggestions of a ‘credit crunch’ noting “only the risky borrowers have actually been constrained by the tightening in lending standards, as most borrowers take out loans well below the maximum that are offered by lenders”. And the average home loan size across Australia - at $395,800 - is just below record highs of $400,100 in May, implying that Aussies are still taking out significant loans. But househoulds appear more cautious about credit card debt with balances falling for successive months. 

What do the figures show?

Housing finance – number

The number of loans (commitments) by home owners (owner-occupiers) fell by 2.1 per cent in August. Loans are down by 10.2 per cent on the year – the biggest fall in 7½ years (November 2010). 

Excluding refinancing of dwellings, the number of loans fell by 2.9 per cent – the largest fall in eight months.

Loans by owner-occupiers for the construction of homes fell by 6.2 per cent – the biggest fall in six months.

Loans to buy newly-erected dwellings rose by 0.3 per cent, the first increase in six months.

Loans for the purchase of established dwellings (excluding refinancing) fell by 2.5 per cent – the largest fall in eight months.

The number of refinancing transactions fell by 0.6 per cent.

Changes in home loans across the country: NSW (down 1.0 per cent); Victoria (down 3.0 per cent); Queensland (down 4.8 per cent); South Australia (up 1.9 per cent); Western Australia (down 0.3 per cent); Tasmania (down 2.2 per cent); Northern Territory (down 10.6 per cent); ACT (up 2.7 per cent).

Housing finance – value

The value of new housing commitments (owner occupier and investment) fell by 2.1 per cent in August.

Owner-occupier loans fell by 2.7 per cent – the biggest fall in 2½ years - and investment loans fell by 1.1 per cent, a sixth successive decline. Over the year to August, owner-occupier loans declined by 3.9 per cent - the steepest decline in 21 months – while investor loans have declined by 20.5 per cent, the largest decline in over two years. 

The value of loans by owner-occupiers and investors to build new homes fell by 7.9 per cent in August to $2.82 billion to be down 11.8 per cent on the year – the largest annual decline in six years. 

Housing finance – other statistics

The value of cancelled loans totalled $1.408 billion in August, up from $1.365 billion a year earlier.

Commitments actually advanced (loans made) totalled $20.6 billion, up by 1.0 per cent on a year earlier.

The proportion of first-time buyers in the home loan market eased from 18.0 per cent in July to 17.8 per cent in August (decade-average 17.8 per cent) – just below six-year highs. 

The proportion of fixed rate loans rose from 11.8 per cent in July to 12.3 per cent in August.

And the average home loan across Australia fell from $396,100 in July to $395,800 in August to be up 7.1 per cent on the year.

Credit & debit card lending:

The average credit card balance fell by $5.90 to $3,217.82 in August, down from $3,223.73 in July and $3,278.35 in June.

Of credit cards attracting interest charges, the average outstanding balance fell by $25.96 in August to $2,008.62.

The average credit card limit rose by $14.38 to $9,496.10 in August.

Usage of credit card limits stood at 34.0 per cent in July.

The number of credit card accounts stood at 16.013 million in August.

The number of debit card accounts stood at 37.262 million in August.

The number of ATM transactions in August was down by 1.2 per cent over the year. Transactions have been consistently falling in annual terms for over six years.

The number of debit card purchases in August were 15.2 per cent higher than a year ago with the value up by 11.5 per cent.

In August 15.2 transactions per account were made on credit cards (on average) with 15.2 transactions per account also made on debit cards.

What is the importance of the economic data?

The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.

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 rebalancing in the housing market continues. Home prices are rising in some cities and towns, but falling in others. Housing credit growth continues to slow as demand for finance by both both investors and owner-occupiers’ declines. Lending standards are being tightened amid firmer regulatory oversight.

And the major banks have begun lifting mortgage rates, following a sustained increase in funding costs as rising official interest rates overseas increase the cost of borrowing in global financial markets.

The Reserve Bank continues to closely monitor the Aussie housing market and the debt levels of households. We expect a continued orderly slowdown with a soft landing still expected in Sydney and Melbourne. But there are risks that a sharper-than-anticipated downturn could adversely impact home borrowers’ equity, weighing on household confidence and spending.

CommSec doesn’t expect a change in interest rates until at least November 2019.