“Clean sweep”: Lending drops across the board

by Rebecca Pike22 Jan 2019

The tightening of credit is extending beyond housing, as other areas of lending drop in the latest figures.

The Australian Bureau of Statistics (ABS) released the lending figures for November yesterday (21 January).

In seasonally adjusted terms, the value of lending for housing finance, personal finance, commercial finance and lease finance all fell.

Lease finance saw the biggest decrease of 2%, dropping from $607million in October 2018 to $595m in November 2018.

Personal finance saw the second biggest drop of 1.7% from $5.7billion to $5.6b.

Housing finance for owner occupiers, excluding alterations and additions, dropped by 1.4% from $20b to $19.7b.

Commercial finance dropped 0.2% from $43.6b to $43.5b, but in trend terms rose by 0.5%.

Group executive of financial services at Canstar, Steve Mickenbecker, said it was “a clean sweep”.

He said, “The tightening of bank credit is no doubt also extending beyond the housing market and into personal finance and business.

“A 10% fall in the value of your house is a sure way to dampen enthusiasm for opening up the wallet.

“There is nothing like a decline in house prices to slow up spending and with Sydney and Melbourne prices so far down, it’s not surprising that personal finance is down 1.7% and lease finance down 2% seasonally adjusted.”

Under the ABS figures, the purchase of dwellings for rent or resale comes under commercial finance. Breaking down those numbers, the value of investor loans fell by 3.3% in November.

As tightening and dropping house prices are expected to continue this year, the impact on other areas of finance are also expected to continue.

Mickenbecker said, “There is an expectation that further falls in property value during 2019 will influence a continued level of consumer conservatism, reducing demand for lending.

“On the supplier-side, we don’t anticipate nor expect the banks to significantly relax lending criteria from where they are today.”