Latest credit aggregate data from the RBA today, shows lending momentum to business and the housing sector remained strong. As a result, total lending to residential property rose by $6.7 billion or 4.3% to $1.56 trillion, seasonally adjusted, with loans for owner occupation comprising $6.0 billion and $0.7 billion for investment housing. Business lending rose by $6.5 billion, or 0.76% to $854 billion. Housing lending is still growing at 7% annualised, well above inflation and income growth. This is sufficient to maintain home price growth.
Investment lending makes more than 35.4% of all lending for housing, and all lending for housing comprises more than 60% of all lending in Australia. So the banks remain strongly leveraged to the housing sector.
Looking at the 12 month growth rates, we see investment lending sliding from about 10% last year to around 6.5%, business lending growing at 7.4% and lending for owner occupation growing at 7.3%. These growth trends contain the adjustments between owner occupied and investment lending due to reclassification.
The RBA says:
Following the introduction of an interest rate differential between housing loans to investors and owner-occupiers in mid-2015, a number of borrowers have changed the purpose of their existing loan; the net value of switching of loan purpose from investor to owner-occupier is estimated to have been $40 billion over the period of July 2015 to April 2016 of which $1.2 billion occurred in April. These changes are reflected in the level of owner-occupier and investor credit outstanding. However, growth rates for these series have been adjusted to remove the effect of loan purpose changes.
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