Interest rate hikes and the higher costs of living are weakening levels of borrowing, with investor housing growing by 9.5% in annual terms – the weakest growth rate since records have been maintained, more than 17 years ago.
Personal credit also fell by 0.2% in March, while new home sales fell by 6% in March, reaching their lowest level in nine months.
“It’s no surprise that consumers are cutting back on borrowing with no room to move in the household budget. Rising interest rates, soaring fuel prices, and the increasing cost of fresh agricultural produce, have all added to the escalating stress on the household budget,” said Savanth Sebastian - Equities Economist, CommSec.
“In general terms, credit is now growing by the slowest pace in six years. The March quarter saw the Reserve Bank up the tempo on its fight against inflation, with rapid rate hikes and tougher rhetoric in its statement on monetary policy. Consumers have taken heed of the warning signs and at the same time, housing borrowing is growing at the slowest pace in ten years.”
The credit figures confirm that a sharp fall off in interest by investors is behind the tight conditions in the housing market, Sebastian added.
“Without investors, there is no construction of apartments, keeping the rental market tight and putting upward pressure on rents and home prices,” he said.
“Investors are staying away from the housing market in droves, and the latest figures on new home sales add to the negative sentiment in the sector. We are just not building enough houses and the strength in population growth is likely to see rents increase even further.”
Sebastian said the Reserve Bank would be “very encouraged” by the latest credit figures, and suggested that further evidence of weaker spending and borrowing should be forthcoming, once the March rate hike starts filtering through the economy.
“The interest rate hikes are having their desired impact, and the uncertainty over future rate hikes is likely to see Aussie consumers actively trimming their debt levels even further,” he said.
