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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Thursday, 1 September 2016

Credit growth slowing

Credit growth slows

The Reserve Bank's Financial Aggregates figures for July showed that credit expanded by 0.5 per cent in the month, and 6.0 per cent over the year (slightly slower than the 6.1 per cent expansion over the year to July 2015). 


Housing credit growth of 0.5 per cent for the month and 6.6 per cent over the year to July reflected a hasty rebalancing from investors to owner-occupiers.

In fact, annual investor credit growth has slowed from a cyclical peak of 10.8 per cent to just 4.8 per cent, well below the regulator's arbitrary 10 per cent threshold and the lowest rate of growth since 2009.

Broad money growth has also eased from 6.9 per cent to 6 per cent over the past year.


While term deposit growth remains anaemic, other deposits continue to expand as total broad money rapidly approaches $2 trillion.


Business soft

Business credit growth of just 0.3 per cent followed a negative print in June, resulting in the annualised figure pulling back to 6.2 per cent.


Housing credit

Owner-occupier housing credit growth of 7.6 per cent over the year to July is now driving the property market, reflected in a greater share of the $1.6 trillion of outstanding housing credit now switching over to homebuyers. 


Overall housing credit continues to expand at a faster pace than business credit.


And housing credit is starting from a higher base too, meaning that it is steadily taking up a greater share of total outstanding credit.



The wrap

Overall, housing credit continues to expand at a fair pace, up by 6.6 per cent to a fresh high of around $1.6 trillion.

This is a bit slower than the 7.5 per cent pace seen before APRA's tightening around October last year, but then there are fewer properties for sale, there was the small matter of an election, and interest rates have been cut twice recently.

Furthermore, some of the major banks have reported that homeowners are forging ahead on home loan repayments - NAB has reported that its customers are 15 months ahead of their minimum repayments on average.

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CoreLogic reported that home values rose by 1.1 per cent in August, driven largely by Sydney and Melbourne, where quarterly values rose by 3.9 per cent and 3.4 per cent respectively.

Capital city home values rose by 2.4 per cent over the 3 months, while regional or "rest of state" values fell by 1.1 per cent.