Lending soars on looser home loan rules
Mortgage lending spiked with the passing of federal election jitters and as banks softened the criteria for checking borrowers' ability to pay back loans.
The value of loans granted to housing investors and owner occupiers jumped in July by a seasonally adjusted 3.9 per cent to $32.24 billion, with Australian Bureau of Statistics data showing mortgages to owner-occupiers increased by a better-than-expected 4.2 per cent to 32,427 for the month.
The rise came in the same month that the Australian Prudential Regulation Authority's easing of loan serviceability standards took effect, with banks no longer expected to ensure customers could still repay loans at a minimum 7.0 per cent interest rate.
Instead, lenders can now set their own minimum rate floor and use a 2.5 per cent buffer, which the prudential regulator acknowledged could mean larger loans for some.
BIS Oxford Economics' Maree Kilroy said investor sentiment had also been given a shot in the arm by the Coalition's surprise Federal election victory in May, as well as dual interest rate cuts in June and July.
"After withdrawing from the market for several years, investors have reacted positively," Ms Kilroy said.
The value of loans to owner-occupiers shot up 5.3 per cent to $13.3 billion for July - well above expectations of a 1.5 per cent rise - while the value of investor loans jumped by 4.7 per cent to $4.6 billion.
The number of loans to first-time owner-occupier home buyers rose by 1.3 per cent to 9,258.
Housing Industry Association economist Angela Lillicrap said this augured well for the wider market.
"First home buyers account for just under one third of the total market ... the continued growth of this segment is important," Ms Lillicrap said.
Property prices - which had already shown signs of stabilising when the lending changes were put in place in July - subsequently shot up in August by the largest margin in two years.
Ms Lillicrap said she expected further improvement in sentiment when the impact of federal tax cuts and interest rate reductions flowed through to investor's bank accounts.
Total lending for the July - including refinancing, personal finance, renovations, and lease finance - increased by 1.3 per cent to just over $65 billion.
The business lending decline slowed to 1.1 per cent to $32.78 billion, following a 16.5 per cent decline in June.
Ms Kilroy said the positive sentiment appeared to be rippling primarily through the established dwellings market, with the number of loans for the construction of new dwellings down by 1.6 per cent to 5,204.
The Australian dollar rose from 68.47 US cents after the data's release and was worth 68.54 US cents by 1327 AEST.
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