Housing Loans

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<p>SPONSORED POST</p>
<p>Don’t make the mistake of setting your mortgage and forgetting about it for the next 25 years – because it could cost you dearly.</p>
<p>One obvious <a href="https://www.ratecity.com.au/home-loans/refinancing-home-loans?utm_source=propertyobserver&amp;utm_medium=referral&amp;utm_campaign=rcsale_propertyobserver_article4&amp;rmatt=tsid:1030695%7Ccid:54369%7Ccgid:543693734136%7Ccrid:15969009" target="_blank">benefit of refinancing</a> is that it gives you the chance to switch to a cheaper rate. Don’t forget, home loans are always changing, so even if you got the cheapest rate when you took out your mortgage, there’s a good chance that’s no longer the case.</p>
<p>Another benefit of refinancing is that it could allow you to access more flexible repayment terms, unlock equity to fund an investment property and consolidate a range of debts.<span style="font-size: 12.16px;"> </span></p>
<p>RateCity has made it easy to change lenders with its <a href="https://www.ratecity.com.au/sale?utm_source=propertyobserver&amp;utm_medium=referral&amp;utm_campaign=rcsale_propertyobserver_article4&amp;rmatt=tsid:1030695%7Ccid:54369%7Ccgid:543693734136%7Ccrid:15969009" target="_blank">Switch &amp; Save Sale</a>. Here are the top five reasons to take part:</p>
<p><span style="text-decoration: underline;">1. Change to a cheaper home loan</span></p>
<p>Refinancing into a cheaper mortgage makes obvious sense. However, sometimes people don’t realise how much money they could save.</p>
<p>Imagine you had an interest rate of 4.25 per cent on a $400,000 mortgage that you were repaying at the rate of $2,500 per month. If you switched to a rate of 4.00 per cent and left your monthly repayments unchanged, your loan term would be reduced from 19 years and nine months to 19 years and two months. That would allow you to eliminate seven months of repayments, for a $17,500 saving.</p>
<p><span style="text-decoration: underline;">2. Change to a better home loan</span></p>
<p>Another advantage of refinancing is that it can allow you to move to switch to a more flexible mortgage.</p>
<p>That could allow you to access new features such as an offset account, a redraw facility, the ability to make extra repayments or even the ability to take a repayment holiday. You could also move to a fixed rate or move to a variable rate or move to a loan that is half and half.</p>
<p><span style="text-decoration: underline;">3. Unlock equity to fund an investment property</span></p>
<p>In certain circumstances, refinancing your home will allow you to access extra funds that you could then use as a deposit on an investment property.</p>
<p>To unlock extra equity, you need to get a new valuation on your home when you refinance, and that new valuation needs to be higher than the old one.</p>
<p>Imagine you originally borrowed $400,000 to purchase a $500,000 property – that would have given you a loan-to-valuation (LVR) ratio of 80 per cent. Now imagine you’ve since reduced your mortgage to $370,000 while the value of your home has risen to $550,000 – that would give you a new LVR of 67 per cent.</p>
<p>If your new lender allows you to increase your LVR to 80 per cent, you could increase your mortgage from $370,000 to $440,000. That extra $70,000 could then be used as a deposit on an investment property.</p>
<p><span style="text-decoration: underline;">4. Unlock equity to fund other expenses</span></p>
<p>Of course, there are other ways you could spend that hypothetical $70,000 mentioned above. You could use it to fund value-adding renovations. You could use it to replace your old car. Or you could put it into an offset account and spend it several years in the future.</p>
<p><span style="text-decoration: underline;">5. Consolidate debt</span></p>
<p>Imagine you were currently paying off a $370,000 mortgage at 4.25 percent, a $25,000 personal loan at 9.75 percent and a $15,000 credit card debt at 16.50 percent.</p>
<p>A new lender might allow you to refinance those three debts into a single $410,000 mortgage. Even if your new home loan was still priced at 4.25 percent, this sort of consolidation would not only make your life simpler, it would also allow you to repay the personal loan and credit card at a much cheaper rate.<span style="font-size: 12.16px;"> </span></p>
<p><span style="text-decoration: underline;">Refinancing made easy</span></p>
<p>RateCity is simplifying the refinancing process with its <a href="https://www.ratecity.com.au/sale?utm_source=propertyobserver&amp;utm_medium=referral&amp;utm_campaign=rcsale_propertyobserver_article4&amp;rmatt=tsid:1030695%7Ccid:54369%7Ccgid:543693734136%7Ccrid:15969009" target="_blank">Switch &amp; Save Sale</a>, which will give borrowers access to market-leading rates.</p>
<p>Borrowers who are with ANZ, Commonwealth Bank, NAB or Westpac could save up to $39,000 over 15 years by switching through the <a href="https://www.ratecity.com.au/sale?utm_source=propertyobserver&amp;utm_medium=referral&amp;utm_campaign=rcsale_propertyobserver_article4&amp;rmatt=tsid:1030695%7Ccid:54369%7Ccgid:543693734136%7Ccrid:15969009" target="_blank">Switch &amp; Save Sale</a>.</p>
<p>RateCity arrived at that figure after calculating how much borrowers would save if they switched from an average-sized mortgage from the average discounted variable rate offered by one of the big four banks to the lowest variable rate in the <a href="https://www.ratecity.com.au/sale?utm_source=propertyobserver&amp;utm_medium=referral&amp;utm_campaign=rcsale_propertyobserver_article4&amp;rmatt=tsid:1030695%7Ccid:54369%7Ccgid:543693734136%7Ccrid:15969009" target="_blank">Switch &amp; Save Sale</a>.</p>
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5 reasons you must refinance your home loan: RateCity

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<div class="column">GUEST OBSERVER</div>
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<div class="column">The number of loans (commitments) for budding home owners (owner-occupiers) rose by 0.9 percent in November after falling by 0.6 percent in October. It was only the second rise in lending in five months. </div>
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<div class="column">The value of loans rose by 2.2 percent in November with owner loans up 0.4 percent and investor loans up 4.9 percent.</div>
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<br>The ANZ/Roy Morgan consumer confidence rating eased from four-month highs, falling by 0.7 per cent to 119.3 in the week to January 15. Confidence is up 4.6 per cent over the year and well above the average of 113.1 since 2014.</div>
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<br>The inflation expectation 2 years ahead was at 4.6 per cent, a 13-month high. Inflation expectations has now held above 4 per cent for the past 5 months.</div>
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<br>The Bureau of Statistics (ABS) reported that new vehicle sales rose by 0.3 per cent in December. The CommSec Luxury Vehicle index hit record highs in 2016 with sales of 17 luxury marques up 12.1 percent on a year ago. </div>
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<p>On its own, the lift in home loans doesn’t look overly concerning – especially given it was only the second rise in the past five months. But couple it with the lift in home prices in the latter part of last year and it suggests that the housing landscape may continue to cause policymakers a little bit of angst over 2017. Even more so when you delve a bit deeper into the data and realise that the lift in the value of loans was largely driven by investors.</p>
<p>The value of loans by investors surged by 4.9 per cent in November to be up 21.4 over the year – the strongest annual growth in 19 months.</p>
<p>If home prices continue to lift, with growth largely driven by investor loans, regulators may look at further restrictions to curb lending.</p>
<p>Household confidence remains just shy of recent four month highs. And more importantly confidence is holding well above longer-term averages. In particular, the measure of whether it was a good time to buy a major household item lifted to the highest levels in five months. No doubt the discounts offered by retailers post-Christmas are enticing households to spend a little bit more freely. </p>
<p>Interestingly the inflation expectation 2 years ahead was at 4.6 per cent in the past week - a 13-month high. Inflation expectations have now held above 4 per cent for the past 5 months. There is no doubt that inflationary pressures have bottomed out and are likely to start lifting.</p>
<p>Annual new vehicle sales are just shy of recent record highs, suggestive of underlying strength in business and consumer sentiment and finances. But the trends aren’t uniform with sales of sports utility vehicles consistently setting new highs while passenger car sales have now fallen to 20- year lows in rolling annual terms. </p>
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<div class="column">What do the figures show?</div>
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<div class="column">Housing finance - number</div>
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<div class="column">The number of loans (commitments) for budding home owners (owner-occupiers) rose by 0.9 per cent in November after falling by 0.6 per cent in October. It was only the second rise in lending in five months. Excluding the refinancing of dwellings, the number of loans was up by 2.1 per cent.<br><ul>
<li>  The number of new home loans was down by 2.6 per cent on a year ago.</li>
<li>  Loans by owner-occupiers for the construction of homes rose by 2.3 per cent in November.</li>
<li>  Loans to buy newly-erected dwellings rose by 3.3 per cent.</li>
<li>  Loans for the purchase of established dwellings (excluding refinancing) rose by 2.0 per cent.</li>
<li>  The number of refinancing transactions fell by 1.2 per cent.</li>
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<p>Lending across states/territories in November: NSW (+1.5 per cent); Victoria (+0.8 per cent); Queensland (+2.4 per cent); South Australia (-1.3 per cent), Western Australia (-0.7 per cent); Tasmania (-1.0 per cent); Northern Territory (+2.7 per cent); ACT (+0.2 per cent).</p>
<p>Housing finance - value</p>
The value of new housing commitments (owner occupier and investment) rose by 2.2 per cent in November after rising by 0.5 per cent in October. Owner-occupier loans rose by 0.4 per cent but investment loans rose by 4.9 per cent.<br><p>The value of loans by owner-occupiers and investors to build new homes rose by 14.2 per cent in November after falling by 1.7 per cent in October. The value of loans to build new homes rose to an 8-month high of $3.07 billion in November.</p>
<p>Housing finance – other statistics</p>
<p>The proportion of first-time buyers in the home loan market rose from 13.7 per cent to 13.8 per cent in November (long-term average 19.4 per cent).</p>
The proportion of fixed rate loans eased from 12.8 per cent to 12.5 per cent in November. And the average home loan across Australia stood at $376,600 in November, up 3.6 per cent in the month but down 1.6 per cent on a year ago.</div>
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<p><span>Consumer confidence </span></p>
<p>The ANZ/Roy Morgan consumer confidence rating eased from four-month highs, falling by 0.7 per cent to 119.3 in the week to January 15. Confidence is up 4.6 per cent over the year and well above the average of 113.1 since 2014. Two of the five components of the index rose in the latest week:</p>
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<li>  The estimate of family finances compared with a year ago was down from +13 to +8;</li>
<li>  The estimate of family finances over the next year was down from +33 to +32;</li>
<li>  Economic conditions over the next 12 months was unchanged at +2;</li>
<li>  Economic conditions over the next 5 years was up from +11 to +12;</li>
<li>  The measure of whether it was a good time to buy a major household item was up from +41 to +43 – the strongest reading in 5 months.</li>
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<p>In addition the inflation expectation 2 years ahead was at 4.6 per cent, a 13-month high. Inflation expectations has now held above 4 per cent for the past 5 months.</p>
<p>New car sales:</p>
According to the Australian Bureau of Statistics (ABS) new vehicle sales rose by 0.3 per cent in December after falling by 0.7 per cent in November. Passenger car sales rose by 3.6 per cent, while sales of sports utility vehicles fell by 3.3 per cent and sales of “other” vehicles (includes utilities, panel vans, cab chassis, goods carrying vans, rigid trucks, prime movers, non-freight carrying trucks, and buses) rose by 0.7 per cent.</div>
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<br>New vehicles sales were up by 0.2 per cent over the year. Passenger car sales in December were down by 4.2 per cent over the year, while SUVs sales were unchanged and “other vehicles” were up by 10 per cent.<br><p>In rolling annual terms, 1,178,133 new vehicles were sold over the 2016 calendar year. Sales of SUVs (441,023) eased from record highs in annual terms, while annual sales of “other” vehicles stood at a record high of 250,853. Sales of passenger vehicles fell to a 20-year low of 486,257 in the year to December.</p>
<p>CommSec Luxury Vehicle index</p>
The CommSec Luxury vehicle index hit record highs in 2016. Sales of 17 luxury marques totalled a record 106,658 units in 2016, up 12.1 per cent on a year ago. Luxury vehicles now account for 9.17 per cent of total vehicle sales and a record 11.50 per cent of passenger cars and SUVs alone.</div>
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<br>The CommSec Luxury vehicle index includes Audi, Aston Martin, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, Maserati, Maybach, Mercedes-Benz, Mclaren, Porsche and Rolls Royce.</div>
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<br>In 2016 record sales were recorded by Audi, BMW, Ferrari, Jaguar, Lamborghini and McLaren.<br><p>Luxury auto sales have been running at a double-digit annual rate for almost four years.</p>
<p>What is the importance of the economic data?</p>
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.</div>
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<br>The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.<br><p>The Australian Bureau of Statistics provides seasonally adjusted and trend estimates of industry data. The Federal Chamber of Automotive Industries releases estimates of car sales on the third business day of the month. The figures highlight the strength of consumer spending as well as conditions facing auto &amp; components companies.</p>
<p>What are the implications for interest rates and investors?</p>
<p> Looking forward, policymakers will keep a close eye on how the rebalancing of the domestic economy (away from mining investment) is keeping pace. Inflation and housing activity are likely to be closely watched over 2017. </p>
<p><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></p>
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Investor loans soar, inflation makes a comeback: CommSec's Savanth Sebastian

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<p><span style="line-height: 1.3em;">GUEST OBSERVER</span></p>
<p><span style="line-height: 1.3em;">Lending: Total new loans (personal, business, housing &amp; lease) rose by 0.7 percent in March after a 3 per</span><span style="line-height: 1.3em;">cent rise in February. Lending was just 3.9 percent shy of the 7½-year high recorded in November 2015.</span></p>
<p>Total lending is up 1.6 percent on a year ago.</p>
<p>Within personal fixed finance commitments, loans for new cars were up by 20.4 percent on a year earlier <span style="line-height: 1.3em;">while loans for used cars were up 15.5 percent. Loans for residential blocks of land were up by 9.1 per</span><span style="line-height: 1.3em;">cent on a year ago.</span></p>
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<p><span style="line-height: 1.3em;"><img src="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.53.10%20PM.png" alt=""> </span></p>
<p>The lending figures have implications for finance providers, retailers, and companies dependent on consumer and business <span style="line-height: 1.3em;">spending.</span></p>
<p>What does it all mean?</p>
<p>Similar to the housing finance data early this week, the lending statistics is essentially old news – pre Reserve B<span style="line-height: 1.3em;">ank interest rate cut. In fact the shift in Reserve Bank commentary to a lower inflation profile suggests that </span><span style="line-height: 1.3em;">further interest rate cuts are on the cards. And in that context very likely to support further lending not just in </span><span style="line-height: 1.3em;">housing but across the business sector as well.</span></p>
<p>The lift in borrowing across the economy in March is encouraging coming of the back of solid gains in February.</p>
<p>Overall, total lending is just shy of 7½-year highs recorded in late 2015. While lending remains healthy the hope <span style="line-height: 1.3em;">would be that business borrowings lift from here - driving investment and supporting medium term growth.</span></p>
<p>The generational low interest rates will be supportive of further borrowing – but there is no guarantee. While <span style="line-height: 1.3em;">Reserve Bank policymakers would be hoping that the latest rate cut spurs another round of activity, they would be </span><span style="line-height: 1.3em;">well aware that borrowers are cautious about taking on more debt. And lower interest rates compress bank </span><span style="line-height: 1.3em;">margins, affecting profits and potentially investment, employment and shareholder returns.</span></p>
<p>Unfortunately elections cause consumers and businesses to hold back on spending, employment and investment <span style="line-height: 1.3em;">plans, and that is the risk to the positive momentum that has built up in recent months. CommSec expects that the </span><span style="line-height: 1.3em;">low inflation outlook will result in further cuts to the cash rate. Rate cuts have been pencilled in for August and </span><span style="line-height: 1.3em;">November.</span></p>
<p>What do the figures show?</p>
<p>Lending Finance</p>
<p>Total new loans  (personal, business, housing &amp; lease) rose by 0.7 percent in March after a 3 percent rise in <span style="line-height: 1.3em;">February. Lending was just 3.9 percent shy of the 7½-year high recorded in November. Total lending is up 1.6 </span><span style="line-height: 1.3em;">percent on a year ago.</span></p>
<p>Housing finance:  The seasonally adjusted measure of construction and new purchases fell by 1.2 percent in <span style="line-height: 1.3em;">March while alterations &amp; additions rose by 0.4 per cent. Home loans are up 11.9 percent on a year.</span></p>
<p>Commercial finance : The seasonally adjusted series for the value of total commercial finance commitments rose <span style="line-height: 1.3em;">by 0.9 percent in March after rising by 4.8 per cent in February. Revolving credit commitments rose by 2.3 per</span><span style="line-height: 1.3em;">cent. Fixed lending commitments rose by 0.4 percent. Business loans are down 2.2 percent over the year.</span></p>
<p>Personal finance : The seasonally adjusted series for the value of total personal finance commitments rose by <span style="line-height: 1.3em;">6.3 percent in March after falling by 2.9 percent in February. Revolving credit commitments rose by 11.9 percent </span><span style="line-height: 1.3em;">and fixed lending commitments rose by 3 per cent. Personal loans are down 1.9 percent over the year.</span></p>
<p>Within personal fixed finance commitments, loans for new cars were up by 20.4 percent on a year earlier <span style="line-height: 1.3em;">while loans for used cars were up 15.5 percent. Loans for residential blocks of land were up by 9.1 percent on a </span><span style="line-height: 1.3em;">year ago.</span></p>
<p>Lease finance : Lending fell by 7.7 percent in March and was up 0.8 percent over the year.</p>
<p>What is the importance of the economic data?</p>
<p>Lending Finance  is released monthly by the Bureau of Statistics and contains figures on new housing, personal, <span style="line-height: 1.3em;">commercial and lease finance commitments. The importance of the data lies in what it reveals about the </span><span style="line-height: 1.3em;">appropriateness of interest rate settings, confidence and spending levels in the economy.</span></p>
<p>What are the implications for interest rates and investors?</p>
<p>At present the national economy is tracking ok. Economic growth is healthy and more encouragingly <span style="line-height: 1.3em;">unemployment is at a 2½-year low. However the concern for policymakers is that the deflationary environment </span><span style="line-height: 1.3em;">becomes more firmly entrenched in coming quarters. A sustained super low inflation landscape will lead to low </span><span style="line-height: 1.3em;">inflationary expectations over time and in turn a shift in asset allocation.</span></p>
<p>The bottom line is that underlying inflation is undershooting the 2-3 percent target band and that suggests little <span style="line-height: 1.3em;">risk in cutting rates a little further. CommSec believes there is a strong chance the Reserve Bank will cut interest </span><span style="line-height: 1.3em;">rates twice more this year, taking the cash rate to a historical low of 1.25 percent by in November.</span></p>
<p><a href="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.56.43%20PM.png" target="_blank"><span style="line-height: 1.3em;">Click to enlarge</span></a></p>
<p><span style="line-height: 1.3em;"><img src="/images/2016/05/13/Screen%20Shot%202016-05-13%20at%2012.56.43%20PM.png" alt=""></span></p>
<p><span style="line-height: 1.3em;"><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a>.</em></span></p>
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Personal loans drive lift in lending: CommSec's Savanth Sebastian

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<p>GUEST OBSERVER</p>
<p>Private sector credit rose by 0.3 percent in February after a 0.2 percent gain in January. Annual credit growth of 5.0 percent is near 3-year lows.  </p>
<p>Investor housing: Investor housing finance lifted by 0.6 per cent in February to stand 6.7 per cent higher over the year – the fastest growth in 12 months.  </p>
<p>China data: The National Bureau of Statistics manufacturing purchasing managers’ index rose from 51.6 to 51.8 in March while the services gauge rose from 54.2 to 55.1 – a near 3-year high.  </p>
<p>What does it all mean?</p>
<p>The latest lending (private sector credit) figures suggest a subdued borrowing environment. But it is important to point out that lending recorded the biggest lift in 15 months in December and only partially gave back some of that out-sized growth over January and February. The subdued February reading was largely due to a modest slide in business credit which would be expected given the out-sized gain in December. The key will be how business borrowing performs in coming months.  </p>
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<p><img src="https://www.urban.com.au/images/2017/04/02/Screen%20Shot%202017-04-03%20at%208.47.27%20AM.png" alt=""></p>
<p>Interestingly home lending continues to lift, dominated by investor credit growth. In fact annual growth in investor finance is now at a 12-month high. The measures taken over the last couple of year by regulators to curb investment lending had a temporary impact that has faded. And as such it is no surprise that the regulators have today looked at other avenues to tighten lending standards.  </p>
<p>The measures announced by APRA today are designed to keep modest pressure on the brakes of investor home lending rather than represent a slamming on the brakes. Annual growth of investor lending still remains comfortably below the 10 per cent annual growth limit although new lending has been lifting in recent months. Anecdotally the lift in interest rates on investor housing loans is already acting to slow interest in home buying.  </p>
<p>The stronger Chinese manufacturing and services data bodes well for the broader global economy. And given the strong trade links between Australia and China, policymakers would be encouraged by a strengthening Chinese economy.  </p>
<p>No doubt policymakers will continue to discuss key issues like housing affordability, but overall the central bank seems upbeat on the medium-term outlook for the Australian economy. CommSec expects no change to interest rates over the rest of 2017.  </p>
<p>What do the figures show?  </p>
<p>Private sector credit  </p>
<p>Private sector credit (lending) rose by 0.3 per cent in February after a 0.2 per cent gain in January. Annual credit growth eased from 5.4 per cent to a near 3-year   low of 5.0 per cent.</p>
<p>Housing credit grew by 0.6 per cent in February to be up 6.4 per cent on a year ago – annual growth is lifting of the lowest levels in 30 months.  </p>
<p>Owner occupier housing credit rose by 0.5 per cent in February to stand 6.2 per cent higher than a year ago – the slowest growth in 17 months. Investor housing finance lifted 0.6 per cent in February to stand 6.7 per cent higher over the year – the fastest growth in 12 months.  </p>
<p>Personal credit fell by 0.1 per cent in February to be down 1.3 per cent over the year – just up from the 1.4 per cent annual decline in January, which was the biggest annual decline in 41⁄2 years.  </p>
<p>Business credit fell by 0.1 per cent in February after a 0.4 per cent fall in January and 1.1 per cent rise in December. Business credit is 3.7 per cent higher than a year ago – slowest growth in 21⁄2 years.  What is the importance of the economic data?  </p>
<p>Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.</p>
<p><a href="https://www.propertyobserver.com.au/images/2017/04/02/Screen%20Shot%202017-04-03%20at%208.46.29%20AM.png" target="_blank">Click to enlarge</a></p>
<p><img src="https://www.urban.com.au/images/2017/04/02/Screen%20Shot%202017-04-03%20at%208.46.29%20AM.png" alt=""></p>
<p>What are the implications for interest rates and investors?</p>
<p>The Chinese economic data remains encouraging, showing that the transition from the industrial sector to household sector remains on track. The manufacturing sector is expanding, while the services sector is clearly the driver taking up any slack.  </p>
<p>Interest rates are super-low but credit growth is slowing rather than rising. Excluding investor housing, demand for loans is modest. Consumers and businesses are still keen to pay down debt rather than take up new credit.  </p>
<p> Interest rates will remain on hold over the rest of 2017.  </p>
<p><em>Savanth Sebastian is an economist for <a href="https://www.commsec.com.au/" target="_blank">CommSec</a></em></p>
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Investor lending dominates borrowings: CommSec's Savanth Sebastian

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<div class="column"><span style="line-height: 1.3em;">GUEST OBSERVER</span></div>
<div class="column"><span style="line-height: 1.3em;"> </span></div>
<div class="column"><span style="line-height: 1.3em;">The latest lending statistics show a mild consolidation in July, although the result is not a cause for concern – especially given that lending is holding just 4% shy of the seven-year highs reached in April. </span></div>
<div class="column"><span style="line-height: 1.3em;"> </span></div>
<div class="column"><span style="line-height: 1.3em;">The real driver of lending over the past year has been the housing sector and in that context it is investor housing that has driven the strength. However the tighter bank lending standards are starting to have an impact in terms of the housing finance data - loans for construction of new dwellings has now fallen for three consecutive months.</span></div>
<div class="column">
<br><span style="line-height: 1.3em;">It is important to realise while housing activity will continue to be the backbone of the economy over the coming year, it is starting to show signs of starting to cool – especially when it comes to irrational exuberance. If there is an anticipated pullback in home lending policymakers would be hoping that activity amongst the business sector lifts from here.</span>
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<br><span style="line-height: 1.3em;">There would be mild disappointment in the fall in business loans in July. Commercial loans are now down 5% on a year ago. Business conditions are healthy, however businesses are still rather tentative about borrowing. The key driver of future lending will be an ongoing improvement in labour market conditions, rise in </span><span style="line-height: 1.3em;">business hiring intentions and lift in consumer confidence. </span>
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<div class="column"><a href="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.40.39%20PM.png" target="_blank"><span style="line-height: 1.3em;">Click to enlarge</span></a></div>
<div class="column"><span style="line-height: 1.3em;"><img src="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.40.39%20PM.png" alt=""></span></div>
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<div class="column"><a href="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.40.51%20PM.png" target="_blank">C<span style="line-height: 1.3em;">lick to enlarge</span></a></div>
<div class="column"><span style="line-height: 1.3em;"> </span></div>
<div class="column"><span style="line-height: 1.3em;"><img src="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.40.51%20PM.png" alt=""></span></div>
<div class="column"> </div>
<div class="column"><span style="line-height: 1.3em;">The Reserve Bank will dominate headlines next week with a number of releases and speeches. However the focus will be squarely on the Reserve Bank Governor, when he testifies in front of the House of Representatives Economics Committee on Friday. It will be interesting to see the Governors views when it comes to the non- mining business investment and how the housing sector is likely to evolve with the tighter lending standards. CommSec expects no change in interest rates over the next year.</span></div>
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<p><span>What do the figures show? </span></p>
<p><span>Lending finance </span></p>
<p><span>Total new lending commitments (housing, personal, commercial and lease finance) fell by 0.1% in August to $74.1 billion after a 1.3% rise in June. New loans are down 1.1% over the year.</span></p>
<p><span>Housing finance: The seasonally adjusted measure of construction and new purchases rose by 2.2% in July while alterations &amp; additions rose by 0.9%. Home loans are up 13.4% on a year.</span></p>
<p><span>Commercial finance: The seasonally adjusted series for the value of total commercial finance commitments fell by 2.7% in July. Revolving credit commitments fell by 13% while fixed lending commitments fell by 0.9%. Business loans are down 5% over the year.</span></p>
<p><span>Personal finance: The seasonally adjusted series for the value of total personal finance commitments fell by 2.6% in July after rising by 0.9% in June. Revolving credit commitments rose by 2.6% and fixed lending commitments fell by 5.8%. Personal loans are down 12.7% over the year. Within personal fixed finance commitments, finance for used cars was down 2.3% on a year earlier while loans for new cars were up by 8.8%.</span></p>
<p><span>Lease finance: Lending rose by 60.2% in July. Lease finance rose by 68.9% over the year. What is the importance of the economic data?</span></p>
<p><span>Lending Finance is released monthly by the Bureau of Statistics and contains figures on new housing, personal, commercial and lease finance commitments. The importance of the data lies in what it reveals about the appropriateness of interest rate settings, confidence and spending levels in the economy.</span></p>
<p><span>What are the implications for interest rates and investors?</span></p>
<p><span>The Reserve Bank would be comfortable about the mix of borrowings: Aussie businesses are tentatively borrowing - in a measured way. Still, the Reserve Bank would be watching the recent drop in consumer confidence a lot more closely.</span></p>
<p><span>The weaker Aussie dollar is providing solid stimulus to the economy at present and the Reserve Bank will continue to assess the impact on the economy over the next few months. CommSec expects no change to interest rates over the coming year. </span></p>
<p><a href="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.45.44%20PM.png" target="_blank"><span>Click to enlarge</span></a></p>
<p><span><img src="/images/2015/09/11/Screen%20Shot%202015-09-11%20at%202.45.44%20PM.png" alt=""></span></p>
<p> </p>
<p><em><span>Savanth Sebastian is an economist for CommSec. You can follow him on Twitter <a href="https://twitter.com/commsec" target="_blank">here</a>.</span></em></p>
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Tighter bank lending standards showing impact: Savanth Sebastian

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<span style="line-height: 1.3em;">APRA </span><span style="line-height: 1.3em;">released</span><span style="line-height: 1.3em;"> its latest property exposures figures for the June 2015 quarter today, which confirmed an ongoing surge in new housing loans. </span>
</div>
<div><span> </span></div>
<div><span>As at June 2015 the total of residential term loans to households held by all institutions (ADIs) was $1.33 trillion. </span></div>
<div><span> </span></div>
<div><span>In total this represented an increase of +$31.8 billion (+2.4%) from the prior quarter, and a solid increase of +$97.1 billion (+7.9%) over the year to June.</span></div>
<div><span> </span></div>
<div><span>There were a total of 5.4 million loans outstanding, with an average balance of $243,000.</span></div>
<div><span> </span></div>
<div><span><strong><span style="text-decoration: underline;">Investment loans surging higher</span></strong></span></div>
<div><span> </span></div>
<div><span>Investment loans totalled $518.3 billion, an increase of +$17.7 billion (+3.5%) from the March quarter and massive +$81.1 billion (+18.6%) from one year ago.</span></div>
<div><span> </span></div>
<div><span>That's huge, and well ahead of the rate that the regulator would or should be comfortable with.</span></div>
<div><span> </span></div>
<div><span>Interestingly while loans held by the major banks increased by +7.5% over the past year to $1,076 billion, loans held by other domestic banks increased by a much faster +18.8% pace to $155 billion.</span></div>
<div><span> </span></div>
<div>The major banks still accounted for close to 80 per cent of the domestic new housing loan market, however, with the remainder of the market comprising other banks, credit unions and particularly building societies.</div>
<div><span> </span></div>
<div>
<span>It should be noted that there have been a few issues relating to the reclassification of loans between owner-occupied and investment loans, with material revisions (&gt;10%) pushed through for the September 2014 to March 2015 quarters relating to ANZ and National Australia Bank.</span><br><span><br></span><span>You can see the jump in the chart below. </span><br><span><br></span><span>This has had the impact of accentuating the rate of increase in investment loans while dampening the growth in owner-occupier loans. </span>
</div>
<div><span> </span></div>
<div><span>In any case the trend in <strong>total </strong>loans outstanding since March 2008 has been more than clear, with total residential term loan exposures captured by this data more than doubling over that time.</span></div>
<div><span> </span></div>
<div><span>This is at least partly because the investor segment of the market often opts to amass new debt rather than paying loan balances down, particularly because Australia has prevailing tax legislation which encourages this behaviour.</span></div>
<div><span> </span></div>
<div><a href="/images/2015/08/26/APRA1.jpg" target="_blank"><span>Click to enlarge</span></a></div>
<div><span> </span></div>
<div><span><img src="/images/2015/08/26/APRA1.jpg" alt=""></span></div>
<div> </div>
<div> </div>
<div>
<div>The data revealed that the overwhelming majority of new housing loans in the quarter at 89.3 per cent of new loans were of a loan to value ratio (LVR) of 90 per cent or lower. </div>
<br><div>As denoted by the pink area in the chart below there has been a surge in the number of borrowers using 20 to 40% deposits, now accounting for more than half of new housing loans in the last quarter.<br><br>This may imply that "cashed up" property owners with deep pools of equity are buying investment property at the expense of first time buyers who must save their deposits. </div>
<div> </div>
<div>More than one fifth of new loans in the quarter had a very low loan to value ratio of just 60% or lower.</div>
<div> </div>
<div><a href="/images/2015/08/26/APRA2.jpg" target="_blank">Click to enlarge</a></div>
<div> </div>
<div><img src="/images/2015/08/26/APRA2.jpg" alt=""></div>
<div> </div>
<div>
<div>Higher risk "low doc" loans continued to represent only a tiny fraction of the Australian mortgage market in the June quarter at 0.4 per cent.</div>
<div> </div>
<div><strong><span style="text-decoration: underline;">Market risks</span></strong></div>
<div> </div>
<div>With very few low doc loans written and the overwhelming majority of loans being written with deposits ranging from 10 to 40 per cent, where lies the risk?</div>
<div> </div>
<div>After all, it is hardly as though the market is highly leveraged in aggregate with aro<span>und <span>~</span>$1.4 trill</span>ion of debt sitting against a stonking $6 trillion residential housing market.</div>
<div> </div>
<div>For my money, in terms of the residential mortgage market the answer is that the risk lies in the very high percentage and concentration of interest only loans, whereby typically no repayments are made against the principal in the first five years. </div>
<div> </div>
<div>It is true that loans with offset facilities are continuing to flourish, but nevertheless a whopping 45.8% of new housing loans written in the June 2015 quarter were of the interest only variety.</div>
<div> </div>
<div>Although only 4% of new housing loans in the June quarter were written outside serviceability, it would not be a surprise to see APRA looking more closely at the elevated percentage of interest only loans with renewed interest.</div>
<div> </div>
<div>
<p><span><em>PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>.</em><br></span></p>
<p><em>His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.</em></p>
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pwargent-M4siyDbqQY

Investment loans power on: Pete Wargent

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<div>EXPERT OBSERVER</div>
<div> </div>
<div>Housing conditions were strong up until the end of February, the last of the pre-Coronavirus data series showed. </div>
<div> </div>
<div><span style="font-size: 12.16px;">Total housing lending was fairly steady at $19.5 billion, representing an increase of +13.1 per cent from a year earlier, mainly driven by homebuyers. </span></div>
<p><span style="font-size: 12.16px;"><img src="https://1.bp.blogspot.com/-Tj7kB74Cv28/Xo048SI75LI/AAAAAAAA1Jg/s4CFqoIWW4gX7Mo97meC-8FgegCjW6M7wCNcBGAsYHQ/s640/HF2.jpg" width="640" height="366" data-original-height="824" data-original-width="1440"></span></p>
<p><span>First homebuyer commitments rose to the highest level since 2009.</span></p>
<p><br><img src="https://1.bp.blogspot.com/-7d99RZVWWZM/Xo048PZtQVI/AAAAAAAA1JY/mkyCDs4_KPUAmZJBb1bFWbRLACAWaY3awCNcBGAsYHQ/s640/HF3.jpg" width="640" height="378" style="font-size: 12.16px;" data-original-height="828" data-original-width="1398"></p>
<div>At the state level, homebuyer loans (ex-refi) in Queensland and Western Australia were strong, while New South Wales and Victoria saw a partial retracement, although volumes in these states remained +15 per cent and +20 per cent higher than a year earlier respectively.</div>
<div> </div>
<div class="separator"><img src="https://1.bp.blogspot.com/-Kiyhs8_oEo4/Xo048QGK6oI/AAAAAAAA1Jc/2-ANgNnHLDsVHpZypHKAfi0zxh4AET7kQCNcBGAsYHQ/s640/HF1.jpg" width="640" height="380" data-original-height="829" data-original-width="1392"></div>
<p><span style="font-size: 12.16px;">For home buyers purchasing existing dwellings the average loan size was steady at a near-record high.</span></p>
<div class="separator"><img src="https://1.bp.blogspot.com/-_n553QTxyPs/Xo049K_1vkI/AAAAAAAA1Jk/ubZ9VV4Y3DUgx9yKI7xSyX2DLjkbaiB5QCNcBGAsYHQ/s640/HF4.jpg" width="640" height="382" data-original-height="818" data-original-width="1369"></div>
<p><span>There was some variation around the states, partly impacted by refinancing activity.</span></p>
<div class="separator"><img src="https://1.bp.blogspot.com/-V0wxrfOsSto/Xo049Qhu3uI/AAAAAAAA1Jo/ibRdXCV_EdMM0hP04S3mmFceQHshcVOkgCNcBGAsYHQ/s640/HF5.jpg" width="640" height="374" data-original-height="831" data-original-width="1421"></div>
<div>
<strong>The wrap</strong><br><br>Overall, lending volumes were considerably stronger than a year earlier up until February 2020, but transaction activity is now expected to drop sharply through March and April as movements are restricted. </div>
<div>
<strong><br class="Apple-interchange-newline">PETE WARGENT</strong><em> is the co-founder of AllenWargent property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank">blogger</a>.</em>
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j.ballantyne1990-6AQqhLzZaK

Housing loans declined slightly in February: Pete Wargent

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<p>The number of prime Australian housing loans in arrears has risen for the fifth consecutive month, figures according to the Standard &amp; Poor’s Performance Index (SPIN) show.</p>
<p>Not by much as 1.13 percent of prime residential mortgage-backed securities (RMBS) were in arrears during March – up from 1.11 percent in February.</p>
<p>“While a decline in outstanding loan balances during the month would have affected this movement, the dollar value of loans in arrears increased, resulting in prime arrears being up overall,” S&amp;P noted.</p>
<p>The proportion of full-doc loans rose to 1.09 per ent in March from 1.07 percent a month earlier.</p>
<p>According to S&amp;P, the SPIN for low-documentation loans meanwhile fell 14 basis points in March to 4.41 percent, with part of the decline reflecting a rise of around 2 percent in outstanding loan balances,” the agency said.</p>
<p>“Low-doc loans represent around 1.3 percent of total loans outstanding that underlie prime RMBS transactions – down from a peak of 13.2 percent in January 2008.”</p>
<p>Regional banks experienced the largest decline in arrears of all loan originator types – down 13 basis points to 2.02 percent – while the major banks’ SPIN rose 7 basis points to 1.01 percent.</p>
<p>Arrears remain below their decade-long average of 1.25 percent, S&amp;P advised.</p>
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