Challenge To Banks On Home Loan Slump

Canberra.

The housing industry is still in the doldrums, with the latest figures showing that home lending has slumped to its lowest level in six months.

The figures also revealed that banks are being trounced by other mortgage lenders in the race for the home-loan dollar.

According to the Bureau of Statistics, the number of dwelling loans approved during May fell by 3.1 per cent to 36,867, adjusted for seasonal variations, after a marginal increase in April.

The main factor was a sharp 10.7 per cent drop in the number of loans approved for home building, which were almost 12 per cent down on the level of a year earlier.

The Real Estate Institute of Australia said the May result continued a ``disappointing phase" for the housing industry which has seen signs of strong growth early in the year give way to subdued activity in recent months.

The Institute's president, Mr Phillip Bushby, said a firmer renewal of activity was not likely until after the August Budget.

He said the strong shift in market share towards non-bank lenders was an ``exciting development" for home-buyers, with the increased competition for banks likely to persist.

The Housing Industry Association said there was still ``considerable hesitancy" about home-buying, but predicted some improvement in the second half of 1996 in the wake of recent cuts in bank variable mortgage rates. The bureau's figures showed there were also modest declines in lending for purchase of new dwellings (down 0.7 per cent in May) and established houses (down 1.

9 per cent).

The underlying trend in home-loan approvals has been softening since late last year, with signs of a decline setting in from the start of 1996, the bureau's figures show.

The main decline in lending was recorded by banks, which suffered a 6.1 per cent drop in loan approvals, while the new, smaller lending organisations and building societies bumped up their lending activity by just over 14 per cent.

This involved 30,154 bank loans which still accounted for almost 82 per cent of all lending, while the other lenders accounted for 6713.

A year earlier, however, banks controlled almost 87 per cent of the home-loan market.

The surge in fixed-rate loans also moderated during May, but the 7313 loans approved under fixed-rate conditions was still just under 18 per cent of all lending compared with just 7 per cent a year earlier.

Commonwealth Bank economists said the stage was set for a recovery in residential building, with the excess of housing which emerged in 1994 now being wound back.

But Bankers Trust chief economist Dr Chris Caton said the lingering weakness in approvals for new homes gave ``no cause for optimism". ``The recovery is still, apparently, somewhere over the horizon," he said.