Housing lending skews to higher income earners

Lending picks up again

The value of lending for housing increased by 3 per cent in March 2024, to be 17 per cent higher than a year earlier. 

There was a continued low level of lending for construction, while investor lending is picking up gradually.

Source: ABS

The average size of investment loan increased to a new record high, leading for the usual calls to tighten up lending even further, which is nonsensical.

It's important to note, however, that the average loan size is naturally skewing higher under the new settings, because lower income earners are shut out of the market by the 3 percentage points lending assessment buffer.

A 300 basis points buffer potentially makes sense when interest rates are low and expected to rise.

But now interest rates are higher and expected to fall over the years ahead, so the buffer penalises first homebuyers and single-income households in the pursuit of 'stability'.

Stability may be a laudable goal, but it's questionable whether shutting off the new supply of apartment sales will lead to more or less stability over the medium term, with rents now rocketing, and a chronic shortage of housing stock (to be inevitably followed by a corresponding high-rise glut down the track). 

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