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ABS: Credit Crunch Slowing

Housing loan approvals showed a margin gain in lending in April 2019 with falls for investors (down 2.2% on last month) offset by loans for owner occupiers up (up 1.1% on last month). The results suggest that the credit crunch is slowing.

Total lending for the month gained 0.2% from March 2019 but was still down -16.9% on the April of 2018 with investor loans still -25.2% lower than the pcp and owner occupiers loans still down -13.6% on the pcp.

The rate of decline is however dropping. This months fall of -16.9% on April of last year compares to last month falls of -17.6%.

Credit growth is expect to improve slowly over the next 12 months. The combined effects of APRA's decision in December to remove the cap in the growth of interest-only mortgage lending, its more recent decision to adjust the servicing test along with the RBA's interest rate cut and the certainty on Federal Government housing policy will slowly bring confidence back to the market.

The chart below shows the monthly change in loans made to investors and owner occupiers over the previous 12 months. The rate of decline for investors appears to have bottomed out and the latest results for owner occupiers appears suggests that they too wil shortly bottom out. It will take some time before annual credit growth returns to positive and as such the drag on the economy from what has already occurred in the housing market will take some time to unwind.