Deepening Slump Sees Australian Home Lending Fall Most in 8 Years

(Bloomberg) -- Australia’s banks sharply reduced mortgage lending in the third quarter in a further sign that weakness in the housing market is spreading.

• New lending fell 7.4 percent from a year earlier, the biggest decline since the same period in 2010, quarterly data from the Australian Prudential Regulation Authority showed on Wednesday.

Key Insights

• New lending to owner-occupiers was down 4.6 percent on the same quarter last year, the biggest fall in nearly eight years. This signals weakness in housing credit is no longer confined to the investor lending segment, which had been the major target of regulatory interventions
• Interest-only loans made up 16 percent of new lending -- down from a peak of almost half in June 2015 -- as banks continue to pull back on riskier credit
• As price falls continue to accelerate, both buyers and banks are getting increasingly cautious. Last week, the central bank’s No. 2 official Guy Debelle said banks risked exacerbating the slump if they all pulled back from lending simultaneously
• The APRA figures contrast with unexpectedly strong October data from the Australian Bureau of Statistics on Monday which showed the value of home-loan approvals rising. Some economists said the ABS data was probably a one-off, but potentially hinted that some stability was returning to the credit market

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• Sydney’s property market slump reached a new milestone this week, with values falling further than the late 1980s when Australia was on the cusp of entering its last recession
• More here

To contact the reporter on this story: Emily Cadman in Sydney at ecadman2@bloomberg.net

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Chris Bourke, Edward Johnson

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