Aussie property investors defy interest rate gloom

The Reserve Bank of Australia (RBA) has released credit growth data for the month of May, which captures the first 0.25% hike in the official cash rate.

Mortgage credit growth rose by 0.6% over May, with the quarterly rate of growth rebounding slightly to 1.8%:

Quarterly mortgage credit growth

Rebound despite May’s 0.25% rate hike.

The quarterly rebound was driven by investors, which hit their highest level of mortgage growth since mid-2015:

Quarterly mortgage credit growth

Investors take over from owner-occupiers in driving mortgage growth.

However, annual mortgage growth is topping out at 7.9%, and will likely soon begin to fall:

Annual mortgage credit growth

Annual mortgage credit growth tops out.

Again, investor mortgage growth is rising, while owner-occupier mortgage growth is on the decline:

Annual mortgage credit growth by segment

Investor mortgage growth rising, owner-occupier mortgage growth falling.

With the RBA tipped to hike interest rates aggressively over the remainder of 2022, expect mortgage growth to fall as buyers wait on the sidelines.

Unconventional Economist
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Comments

  1. Mortgage credit growth needs to go negative for a while as the next buyer borrows less than the last. Maybe an Irish style decade or so should get the prices back to an acceptable level.

  2. Camden HavenMEMBER

    Investors must believe that their debts will be inflated away. Like Zimbabwe with 100% inflation ,and 190% rates

  3. pfh007.comMEMBER

    What is wrong with these investors?

    Haven’t they heard the news that the RBA is lunatic and is absolutely going to smash the property market with a target rate of 2% just as they have done many times over the last 20 years..

    It is almost as though they think the RBA, APRA and the government will protect their punts.

    Puzzling.

    • elasticMEMBER

      They are looking at yields without considering the expected fall in prices. They are currently in a position where they have loads of equity from previous purchases which may not be the case in another year or so.

  4. elasticMEMBER

    With mortgage credit growth rising at 7% a year that is roughly 140B a year increase given about 2T of housing debt. According to Avid commentator on Twitter there was 93B of equity withdrawal from housing on most recent annual data
    https://mobile.twitter.com/AvidCommentator/status/1540906262321254400

    As housing prices fall we’d expect the equity withdrawals to dry up a little but conversely all those households that were paying down their debt quicker will no longer be able to due to rate rises. Additionally there will be much less demand for mortgages as interest rates rise.
    I do expect mortgage credit to head to zero over the next year or two as rates rise and house prices fall.

  5. kannigetMEMBER

    I was at my Daughters yr 9 awards ceremony this morning. Sat next to a real estate agent, he was busy texting back and forth with the owner trying to convince them to accept the offer that was on the table. I could not help but be a peeping Tom and look at the text exchange while he was busily smacking it out with his thumbs….

    It went something like ….

    RE: “He said he wont go above the 675000 offer, but he has finance ready”

    V: “We had higher offers than that on the last place”

    RE: ” Market is changing and rates are going up, people cant stretch as far”

    V: “If I accept this low will I have to go lower on the other places”

    RE: “You could hold out but if your worried the other 2 will go lower then this one is likely to do the same”

    V: ” Let me think about it”

    RE: ” OK but I would recommend you take the offer and we get the other ones on the market sooner than later”