With the latest release of lending finance data from the Australian Bureau of Statistics, we can now analyse the value of mortgage lending across each of the states and territories up until March 2018.  Housing finance data pointed to a slowing of demand with falls over the month in both investment and owner occupier demand.  It is important to note that the headline housing finance data is seasonally adjusted whereas this data is not.  The charts shown include monthly data and a six month rolling average.

NSW value of housing finance commitments

 
In March 2018 there was $12.5 billion worth of housing finance commitments in NSW.  This figure was split between $2.4 billion for owner occupier refinances, $5.0 billion for new lending to owner occupiers and $5.1 billion for investors.  Investors remain the predominant type of borrower in the market, excluding refinances,  accounting for 50.2% of all new lending commitments by value. Despite the tighter credit, investors as a proportion of mortgage demand remain well above the long term average of 37.4%.  Dwelling values have been falling in Sydney since July 2017 and growth is slowing across the rest of NSW.  The recent data shows a clear declining trend in mortgage demand with both new lending to owner occupiers and investor lending falling recently.

Vic value of housing finance commitments

 
There was $9.0 billion worth of housing finance commitments in Vic during March 2018.  The $9.0 billion was split between: $2.0 billion for owner occupier refinances, $4.1 billion for new loans to owner occupiers and $2.9 billion for investors.  Refinances are the only segment of lending which has remained relatively steady over recent months.  Excluding refinances, investors currently account for 41.7% of mortgage demand which is well down on the April 2015 peak of 54.7% but well above the long-term average share of 32.1%.

QLD value of housing dinanc commitments

 
The $5.0 billion in housing finance in March 2018 was split between $1.0 billion for owner occupier refinances, $2.6 billion in owner occupier new loans and $1.4 billion in investor lending.  Refinance activity is pretty steady at the moment while investor credit has been trending lower for a long time while owner occupier new lending has also started trending lower over recent months.  In terms of investment, it currently accounts for 34.2% of total new mortgage lending compared to a long-term average of 34.8%.

SA value of housing finance commitments

 
SA had $1.5 billion worth of housing finance commitments in March 2018.  The $1.5 billion was split between $337.1 million in owner occupier refinances, $743.4 million in owner occupier new loans and $398.5 million in investor commitments.  New lending to owner occupiers has remained fairly steady over recent months while owner occupier refinancing and investor lending has been trending lower for some time.  Investors in SA account for 34.9% of lending (ex-refinances) currently compared to a long-term average of 28.3%.  

WA value of housing finance commitments

 
The $2.3 billion worth of housing finance commitments in WA throughout March 2018 was split between: $469.3 million for owner occupier refinances, $1.2 billion for owner occupier new loans and $596.6 million to investors.  Each of the three segments continue to see the value of lending drift lower which mirrors the ongoing weakness in WA housing demand and value declines.  Despite the ongoing decline in investor lending, they accounted for 32.6% of all new mortgage commitments in March 2018 compared to a long-term average of 29.1%. 

TAS value of housing finance commitments

 
The $379.4 million in housing finance commitments for Tas in March 2018 was the third highest monthly value on record.  The data was split between $78.3 million for owner occupier refinances, $193.7 million in owner occupier new loans and $107.3 million in investor loans (which was also an historic high).  Demand for each of the three types of loans is rising while owner occupier new loans are the predominant source of demand.  Investor demand is certainly climbing, accounting for 35.7% of new mortgage demand over the month which was the highest share since October 2014 and much higher than the long-term average share of 22.7%.

 

NT value of housing finance commitments

 
The value of housing finance commitments in NT during March 2018 was recorded at $117.7 million and it continues to trend lower. Each of the three segments of lending are seeing a declining trend, over the month there was $19.3 million worth of commitments for owner occupier refinances, $63.3 million for owner occupier new loans and $35.0 million for investors.  Historically, owner occupier new loans and investors have accounted for a similar value of lending each month; investors currently account for 35.6% of total new mortgage lending which is slightly lower than the long-term average (36.1%).

ACT value of housing finance commitments

 
The $677.2 million in housing finance commitments in ACT throughout March 2018 was split between: $114.1 million in owner occupier refinances, $353.1 in owner occupier new loans and $210.1 million to investors. Each of the owner occupier segments of lending are relatively steady while investor commitments are trending slightly lower.  Despite it edging a little lower, investors account for 37.3% of total new mortgage lending which is a little higher than the long-term average at 35.2%.

With dwelling values falling, the cost of new mortgages is likely to be less than it was in the past, particularly in NSW and Vic.  We’re also seeing the investor segment slowing and we would expect a further slowdown given the ongoing regulatory focus on interest only lending, mortgage rate premium and that fact that values are falling and rental yields are generally low; all of which make investment a less compelling prospect.  Overall, the outlook for mortgage demand is that it is likely to soften over the coming months, particularly in NSW and Vic while the prospects for a substantial pick-up elsewhere are fairly limited at this stage.