Home loan lending records strongest annual growth in over four years: RBA

by Julia Corderoy01 Jun 2015
Home loan lending has recorded the strongest annual growth in over four years, buoyed by investor loans which recorded the strongest annual growth in seven years.

Housing credit grew by 0.5% in April after a 0.6% rise in March, according to figures released by the Reserve Bank. Housing credit is now up 7.2% on a year ago – the strongest annual growth in almost four and a half years.

Owner occupier housing credit rose by 0.4% in April to stand 5.7% higher than a year ago while investor housing finance lifted 0.8% in April to be up 10.4% over the year – the strongest growth in seven years.

But as home loan lending continues to surge, term deposits held with banks fell by $4.27 billion in April to $521.9 billion, according to the RBA data. Term deposits are now down 2.5% on a year ago – the sharpest decline in 12 years. 

Term deposits have been regularly falling in annual terms for 17 months – the longest period in records going back almost 30 years. Term deposits are lower now than 3 years ago.

However, despite the strength in housing lending, the Reserve Bank is likely to maintain an easing bias over the next couple of months.

“The Reserve Bank will continue to maintain an easing bias. Activity levels across the economy remain patchy and policymakers will continue to debate the merits of another rate cut,” Savanth Sebastian, CommSec economist said.

“Overall inflation is likely to remain subdued over the coming year – at the lower end of the Central Bank’s 2%-3% target band.”

But when it comes to the Reserve Bank’s June monetary policy board meeting tomorrow, economists and analysts have unanimously agreed that the cash rate will remain on hold at 2%.