Mortgage credit growth has bottomed

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By Leith van Onselen

The Reserve Bank of Australia (RBA) has just released the private sector credit aggregates data for the month of March:

Total credit provided to the private sector by financial intermediaries rose by 0.2 per cent over March 2013 after increasing by 0.2 per cent over February. Over the year to March, total credit rose by 3.2 per cent.

Housing credit increased by 0.4 per cent over March following an increase of 0.4 per cent over February. Over the year to March, housing credit rose by 4.4 per cent.

Other personal credit rose by 0.1 per cent over March after increasing by 0.1 per cent over February. Over the year to March, other personal credit decreased by 0.1 per cent.

Business credit was unchanged over March after decreasing by 0.2 per cent over February. Over the year to March, business credit increased by 1.6 per cent.

A chart showing the long-run breakdown in the components is provided below:

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As you can see, personal credit growth (0.1% MoM; 0.2% QoQ; -0.1% YoY) has until recently been deleveraging, whereas business credit growth (0.0% MoM; -0.2% QoQ; 1.6% YoY) and housing credit growth (0.4% MoM; 1.2% QoQ; 4.4% YoY) remains positive in annual terms, but are at subdued levels relative to their long-run average growth rates.

Focusing on the housing market, annual credit growth remained unchanged at its all time (36-year) low of 4.40%. However, as shown by the below chart, housing credit growth looks like it is recovering, albeit off a low base:

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Finally, a breakdown of owner-occupied credit (0.4% MoM; 1.1% QoQ; 3.9% YoY) and investor credit (0.4% MoM; 1.4% QoQ; 5.4% YoY) is provided below:

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As you can see, much of the current mortgage demand is being driven by investors, which has also been reflected in recent housing finance data from the Australian Bureau of Statistics.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.