Mortgage loans support regulators’ concerns | Liverpool City Champion
Stronger mortgage lending among homeowners heightens concerns among Australian financial regulators, who are considering policies to curb activity before indebted households become a risk to the economy.
Record interest rates have pushed borrowers to chase steadily rising house prices, pushing homeowner debt to its highest annual rate since October 2016.
The Reserve Bank of Australia said homeownership credit rose another 0.8% in August to an annual rate of 8.4%.
AMP Capital Markets chief economist Shane Oliver said home credit remains very strong and well ahead of household income growth.
He said real estate debt continues to exceed seven percent and at pace when the Australian Prudential Regulatory Authority first decided to tighten lending standards in 2014.
“Although this is coming a little later than expected… APRA now appears to be using macroprudential controls to slow the growth of home loans from year-end,” Dr Oliver said.
APRA plans to publish an information document on its framework for implementing these policies in the near future.
Overall housing credit, including investors, increased 0.6 percent to 6.2 percent for the year.
More generally, credit, comprising home, business and personal loans, increased 0.6% to 4.7% for the year.
Separate figures showed construction approvals unexpectedly rose 6.8% in August to 18,716.
Economists expected a further 5% drop during the month.
Approvals for single-family homes rose 3.5% to 12,009, while excluding homes, approvals jumped 13.7% to 6,453, the Australian Bureau of Statistics said.
ABS director of construction statistics Daniel Rossi said approvals for single-family homes remain strong despite the HomeBuilder program rollout and ongoing lockdowns in NSW and Victoria.
“Driven by record interest rates, increased household savings and confidence in the housing market, private housing approvals are 23.8% higher year-on-year and 42% higher than August 2019,” did he declare.
Separately, ABS said vacancies fell 9.8% between May and August, but were still 46% higher since the start of the coronavirus pandemic.
ABS head of labor statistics Bjorn Jarvis said the drop in vacancies coincided with closures in NSW, Victoria and ACT, and followed earlier closures in Queensland and South Australia .
“This was the first drop in the number of vacancies since May 2020, during the first wave of lockdowns and restrictions related to COVID,” Jarvis said.
National Australia Bank economist Taylor Nugent said the drop was relatively moderate compared to the 43.3% drop in the middle of last year.
“Labor demand remains resilient and supports expectations of a strong recovery once lockdown restrictions ease,” Nugent said.
Associated Australian Press