Robust rise in housing finance through February as new borrowers defy interest rate pain

Even as household budgets come under pressure, tens of thousands of Aussies took on additional debt in February, new data shows.

Demand in Australia’s housing market remained robust through February with the value of new home loan commitments climbing even as the effects of the Reserve Bank’s recent run of rate hikes continue to flow through the economy.

The value of new loans written rose 1.5 per cent in February to $26.4bn, the Australian Bureau of Statistics reported on Monday, falling slightly short of the 2 per cent increase analysts had forecast.

In the 12 months to February, the value of housing finance commitments were 13.3 per cent higher, the figures showed.

The increase came even as house prices push higher as a result of a post-pandemic surge in migration, underpinning increased demand, and an anaemic pipeline of new housing construction, reducing supply.

Borrowers still entered the housing market in droves despite pressures facing household budgets. Picture: NCA NewsWire / Christian Gilles

The value of new loan commitments to owner-occupiers was the primary driver of the increase, rising 1.6 per cent across the month, and 9.1 per cent over the year, the seasonally adjusted figures showed.

Even as still-high inflation and the RBA’s rates policy crimp household budgets, the pipeline of new entrants into the housing market also remained solid.

New loan commitments to first-home buyers rose a solid 4.3 per cent in February, and up 13.2 per cent on the year, the figures showed.

The strong gain brought the number of new loan commitments for first home buyers to 9377 across the month, following a 5.6 per cent fall in January.

“Lending approvals for first home buyers have been broadly resilient, suggesting that in aggregate higher mortgage rates are not proving that much of a hurdle — at least relative to the alternative of renting,” NAB senior economist Taylor Nugent said.

Property investors were similarly immune from rising cost pressures, with the value of loans to this cohort climbing 1.2 per cent in February and surging 21.5 per cent on a year-ended basis.

“This made up over half of the growth in total new loan commitments over the past year,” Mish Tan, ABS head of finance statistics, said.

ANZ economist Blair Chapman said he expected the monthly uptick in housing finance would remain in the short term.

“Sales volumes have picked up since January suggesting lending should continue to grow in coming months,” Mr Chapman said.

Amid claims that the central bank’s most recent rate increase was unnecessary, analysts said that the rise in new loan commitments demonstrated the effect on the property sector had been muted.
“New loan indicators remain little-changed since October 2023,” J.P. Morgan economist Jack Stinson said.

“The lending data shows little evidence that the RBA’s November hike had [a] … sentiment shock which produced an outsized impact on the housing market.”

Originally published as Robust rise in housing finance through February as new borrowers defy interest rate pain