New Home Loans Reach Record $31bn on the Back of Owner-Occupier Loans

A sold sticker is seen over a for sale sign on an empty development plot in the new development of Bella Vista Waters in Sydney, Australia on Feb. 25, 2019. Mark Kolbe/Getty Images

Home loan commitments have risen to another new high in April, and financial regulators are pleased that it has not led to easing lending standards.

New figures from the Australian Bureau of Statistics show that new housing loans have risen 3.7 percent to a record high of $31 billion (US$23.8 billion), driven by owner-occupier loans.

ABS head of Finance and Wealth Katherine Keenan said the value of new home loans for owner-occupiers reached an all-time high of $23 billion (US$17.6 billion). In comparison, investor loans have returned to their highest level since mid-2017 at $8.1 billion.

Keenan also noted that the number of new owner-occupier home loan commitments had fallen for the third consecutive month. However, it remained at its highest level since July 2009.

New South Wales (8.6 percent) and Victoria (8.4 percent) accounted for most of the owner-occupier rise, while they fell by 7.9 percent in Western Australia.

Representatives from both the Reserve Bank of Australia (RBA) and the industry regulator, the Australian Prudential Regulation Authority (APRA), noted the recent return of investors into the market in a Senate hearing on Wednesday.

APRA Chairman Wayne Byres told senators that the last time the regulator stepped in to manage the market in 2017, interest-only loans comprised 40 percent of all newly approved loans.

He said that there was currently no intention for the regulator to step in at the moment, as lending standards had not slipped in any significant manner which would warrant their involvement.

RBA assistant governor Michelle Bullock said one characteristic of the current lending environment was that it was mostly owner-occupiers, particularly first-home buyers, rather than investors.

“First-homebuyers, in particular, tend to have larger loan-to-value ratio,” Bullock said, referring to one of the indicators that banks often use to calculate the risk of the loan, where a higher ratio tends to mean a greater risk.

“[For first-home buyers] that doesn’t mean they’re more risky. It just means they’re early on in their careers, they’re young, and they don’t have a lot of wealth built up,” she said.

The RBA has stood by their statement that they would not increase the official interest rate from the current 0.1 percent until “at least 2024,” or until the sustained inflation rate reaches 2-3 percent.