Home loans and household spending climb despite rate rises

Australians continued to enter into the home loan market last year, even as interest rates and house prices increased and households spent more on necessities including health and transport.

The number of new owner-occupier loans increased 7.3 per cent in the 12 months to November, even as the Reserve Bank lifted its interest rate benchmark from 2.85 per cent to 4.35 per cent over the year. The value of these loans rose 10.1 per cent, likely reflecting stronger house prices.

The number of new owner-occupier loans increased 7.3 per cent in the 12 months to November.
The number of new owner-occupier loans increased 7.3 per cent in the 12 months to November.Credit: Peter Rae

The latest data from the Australian Bureau of Statistics (ABS) on Friday showed the value and number of new owner-occupier loans grew 0.1 per cent and 1 per cent respectively in the month of November.

The value of new investor loans also increased, climbing 18 per cent over the year and 1.9 per cent in November.

AMP chief economist Dr Shane Oliver said the increase in home loans was strange given increased interest rates, but that it was likely driven by increased immigration and rent.

“It does seem a bit perverse that housing finance has trended up from its lows through last year, whereas interest rates didn’t fall,” he said.

‘We know well from anecdotal evidence that there was a record amount of money put into the property market last year from the bank of mum and dad.’

Shane Oliver, AMP chief economist

“But I suspect that it’s driven by the same factor that drove the rebound in house prices, and that’s a shortage of housing as immigration levels surged. As rental markets tightened with a surge in rents, that forced some people on the sidelines to get into the property market.”

ABS head of finance and statistics Dr Mish Tan said the growth in lending was driven by the three states with the largest populations.

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“For both owner-occupiers and investors, NSW saw the most growth,” she said.

First home buyers also continued to gain their foothold in the market, with the number of new first home buyer loans growing 3.5 per cent in November and 20.3 per cent over the year.

However, Oliver said the increase was partly a result of people relying on the bank of mum and dad and feeling the pressures of the rental market.

“We know well from anecdotal evidence that there was a record amount of money put into the property market last year from the bank of mum and dad,” he said. “There was also an element of people that wanted to get into the market, who were renting, suddenly finding their rents were going up 20 per cent.”

Refinancing activity was stronger as borrowers continued to come off fixed rates, and as interest rates increased over the year. The number of refinanced owner-occupier loan commitments between lenders rose 4.2 per cent over the month, nudging the level seen in March 2022, just before the Reserve Bank commenced a series of cash rate rises, and following a record high of 28,132 in July.

The growth in home loans comes as the bureau also released the latest figures on monthly household spending for November.

Australians spent more on necessities, while continuing to increase spending on discretionary services.
Australians spent more on necessities, while continuing to increase spending on discretionary services.Credit: Oscar Colman

Household spending increased 3.1 per cent over the year as Australians spent more on necessities including health (up 7.8 per cent) and transport (up 8.3 per cent), while continuing to increase spending on discretionary services.

However, Oliver said the household spending data was not seasonally adjusted, or adjusted for inflation, meaning they probably overstated the growth in spending.

“Household spending is up 3.1 per cent for the year, but inflation is above that, so it’s actually down in real terms,” he said. “Most of the growth would also have been accounted for by growth in the population.”

Non-discretionary spending increased 5.8 per cent, with increased spending on transport, health and food being the biggest contributors.

Discretionary spending rose 0.3 per cent, as households ramped up spending on furnishings and household equipment, recreational and cultural services and accommodation services.

ABS head of business statistics Robert Ewing said Black Friday sales boosted discretionary spending in November, similar to the previous year.

While spending on goods remained unchanged across the year – with increased spending on food, furnishings and household equipments offset by reduced spending on recreational and cultural goods – spending on services increased 6.2 per cent, largely reflecting spending on transport and health services.

Oliver said the numbers showed cost-of-living pressures, driven by falling real wages and higher interest rates, were continuing to bite. “Where people have discretion, particularly on goods, spending has stalled,” he said.

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Source: Thanks smh.com