Housing credit is continuing to expand, but one analyst has said the growth in debt could begin to cause concern for the RBA
financial aggregate statistics show outstanding housing credit grew 6.2% for the year to May. The growth drove an increase of 4.7% for overall outstanding credit. Owner occupier housing credit increased by 5.2%, while investor housing credit grew by 8.3%.
“Clearly, housing credit continues to be the main driver of the overall expansion in credit," RP Data research analyst Cameron Kusher said.
Kusher said the vast majority of outstanding credit to financial institutions - some 60.6% - is for housing. He said banks were showing a clear preference for mortgage lending.
"In fact, lending for mortgages has been the preferred option for banks consistently since April 2001, right as the housing market started to boom," he said.
Kusher said the preference for mortgage lending was likely due to strong performance of mortgages and low arrears rates, as well as increasing home equity. But he warned that the RBA
and APRA could grow concerned as household debt levels rise.
"We have no doubt that both the RBA
and APRA will be keeping a close eye on household and housing debt levels as growth in national home values continues. If debt levels continue to rise it is likely to be a potential cause for concern with households becoming more indebted at a time when interest rates are so low. When interest rates inevitably rise in the future, some households may find it harder to repay that debt," he said.