News

February rate cut sparks home loan growth as rates stay steady in March

05 March 2015

The country’s biggest mortgage broker, AFG, has reported a 16 per cent jump in the value of home loans processed last month after interest rates were cut quarter of a per cent back in February. 

It’s a marked difference from the latter part of 2014 where banking regulators such as the Australian Prudential Regulation Authority were looking at measures to dampen risky lending and housing investment. 

Here are some stats from the wholesale mortgager AFG; they processed $4.3 billion in home loans in February and had their biggest ever day mid last week when their brokers wrote $280 million in deals. 

The rate cut in February also seems to have had an impact in stoking the Sydney housing market giving regulators a headache, with economists warning that the cheaper rates risk inflating asset prices without helping economic activity.

Seeing as the cut last month came off the back of the summer holiday period it’s been a little grey as to how much the stimulated property market activity has been seasonal or in direct response to interest rates. 

AFG’s general manager of sales and operations Mark Hewitt told The Age he thinks the rate cut last month had an impact on lending growth. 

“February is the real start to the mortgage year and overall we’re off to a flying start this year,” he said.

“I would say, based on the numbers we’ve seen in the last 10 days or so, it probably is a slight acceleration on what we had seen pre-Christmas.” 

Mr Hewitt said there was no jump in the amount of lending to investors after February’s rate cut, staying steady at 40 per cent. This level has not changed since APRA made plans to limit credit growth to property investors. 

Banks are keeping close watch on their investor lending as a result of APRA’s warnings that if they grow investor lending by over 10 per cent a year they must hold more capital. 

Mr Hewitt said he doesn’t know of any banks changing their practices in response to the new limit but did say they were very conscious of how much investor lending they were doing.

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