Australian mortgage growth nears 3-year high

The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of February.

Quarterly mortgage credit growth continued to strengthen, rising for the seventh consecutive month to 1.2% – the highest rate of growth since June 2018:

Quarterly mortgage credit growth

Quarterly mortgage credit growth hit the highest level since June 2018.

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Owner-occupiers continue to drive mortgage growth, rising by 1.7% over the quarter versus only 0.4% growth for investors:

Owner-occupiers are driving Australia’s mortgage growth, whereas investors have taken a back seat.

Meanwhile, annual mortgage growth continues to lift off the canvass, rising to 3.8% in February 2021. Nevertheless, it remains very low from a historical perspective:

Annual Australian mortgage growth.

Annual mortgage growth remains near historical lows.

The reason why mortgage credit growth remains low, despite the surge in mortgage finance commitments, is because households are also repaying existing mortgages at a record pace. Therefore, new mortgage demand is largely being offset by mortgage repayments.

The upshot is that the ratio of mortgage debt to household income is actually falling across Australia:

Australian housing debt-to-income

Australian households are dis-leveraging, despite the property boom.

This helps to explain why financial regulators are so reluctant to introduce macro-prudential curbs, since the stock of mortgage debt does not represent a financial stability risk.

Unconventional Economist

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