Loans to the private sector again grew at a robust rate in October, in line with September’s growth rate. Figures released by the RBA showed loans made to businesses and loans made for housing were the drivers of the higher-than-expected figures, with total credit rising 0.7% for the month compared to the 0.7% revised figure for September. Total credit grew by 6.7% in the year to October, slightly higher than the revised figure of 6.6% for September.
Business loans, which accounted for 33% of all loan growth in the month, grew by 1.0%, down from the previous month’s 1.1% while housing loans which account for just over 60% of monthly loan growth, grew by 0.6%. Personal loans contracted by 0.3% in October, down from the 0.1% growth in September. In the housing component, “owner-occupier” housing grew at 0.7%, the same as September’s 0.7% while investor loans growth grew by 0.4%, down from September’s 0.5%. This brings the investor loans segment below an annual growth rate of 10%, which should please APRA.
The RBA made an indirect comment in the lower housing investor growth numbers in the release by saying referring to banks change in policy to investor loans. “Following the introduction of an interest rate differential between loans to investors and owner-occupiers a number of borrowers have changed the purpose of their existing loan; the net value of switching of loan purpose from investor to owner-occupier is estimated to have been $30.6 billion over the period of July 2015 to October 2015.”
Westpac noted how growth in the business loans segment had exceeded expectations which had been built on other available finance data. It also suggested Part of the strength in this segment came from what it termed a “valuation effect – the depreciation of the currency raises the Australian dollar value of existing foreign currency denominated debt”. All in all the bank now expects business credit growth to be about 5% annualised.