New home loan lending in Australia rises in June

The value of housing finance commitments in Australia were up in June again, with investors leading the way. The number of new loans to owner occupiers was up 1.2 percent in June after a revised 0.8 percent drop in May. On a year-on-year basis, loans were up 6.7 percent. Even if this seems reasonably strong, it is quite below the 13.1 percent growth witnessed over the year to May, said St George Economics in a research note.

The number of new loans to owner occupiers has continued with its upward trend in June. The value of housing loans for investors was up 3.2 percent in June. There has been a rise in the value of investor loans in the four of the last six months. As a proportion of total loans, there was a 14.3 percent rise in first home buyer loans, as compared with 14.2 percent rise seen in May.

On a year-on-year basis, South Australia, Victoria and the ACT continued to witness strong growth. Tasmania, NSW and Queensland also recorded a strong annual growth; however, Western Australia and Northern Territory recorded a contraction.

Meanwhile, demand for housing loans continues to be strong; however, it has lost some of the zest witnessed in the last few years. The easing of the home loan market is partially why the Reserve Bank of Australia thought it might cut its cash rate in August. The reduction in rate appears likely to underpin demand for home lending. However, it is not expected to unleash the increasing levels of demand seen in earlier years, added St George Economics.

If the Reserve Bank of Australia lowers the cash rate further, the APRA might have to consider additional tightening of prudential measures, said ANZ in a research note. Tighter lending standards for developers are not seen in investor lending for new construction. This implies that additional strength in building approvals might be seen. This along with a record backlog of work outstanding poses certain upside to the expectation that contribution of housing construction to economic growth would ease, added ANZ.