Lending Grows At Five Year High

Lending in May hit its strongest growth rate in more than five years, thanks mostly to housing, and especially investment housing loans.

But the news won’t force the Reserve Bank to do anything to interest rates at its monthly board meeting later today.

Even a fall in new home sales in May won’t force the central bank’s hand on rates.

That’s because figures from the Reserve Bank yesterday showed that home lending continued to grow, which is what the bank wants to see and news of a fall in new home sales in May, after a surprise fall in house prices in the same month, will be seen to be taking some of the heat out of the booming housing sector.

The RBA figures showed total private lending in May rose 0.4% from April (the same growth rate for previous four months) to be up 4.7% in the 12 months to the end of May.

That was a touch quicker than the 4.6% annual rate in April and was the strongest growth seen since March 2009.

It is also significantly quicker lending growth than in May 2013 when the annual rate was 3%.

Home lending rose 0.5% in May, the same as April, to be up 6.2% in the year to May – ahead of April’s 6.1% and the 4.5% annual rate for May 2013. Housing grew the quickest in the year to May since April 2011.

And investment housing surged an annual 8.3% in the year to May, the fastest rate since September 2010, up from an 8% annual rate in April and a more sedate 5.5% annual rate in May of last year.

Personal credit continued weak – falling 0.3% in the month, to be up just 0.3% in the year.

And business lending advanced at a sluggish 0.2% in May, down from April’s 0.3%.

But business lending rose at an annual 2.7%, nearly three times the annual rate of 1% in May 2013.

It was the quickest annual rate since January of last year.

New home sales in May fell for the first time in five months, according to a report from the Housing Industry Association (HIA).

The HIA said its survey of large builders showed sales of private sector new homes fell 4.3% in May from April.

New home sales drop in May

But sales grew by 3.8% over the three months to May to be up 21% compared with the same period a year ago.

Multi-unit sales dropped 16.1% in May, while detached house sales eased 2.2%, the HIA reported.