Mortgage lending growth falls in October to remain at historical lows: RBA

Housing credit provided by lenders to borrowers increased by just 0.3% over October, continuing a trend of record low mortgage growth, according to RBA figures.

This followed an increase of 0.4% over September to leave housing credit growth at 4.7% for the year to October – the lowest rate of growth for data going back to 1976.

Owner occupier lending rose just 0.3% to be up 4.3% for the year with investor lending activity slightly stronger, up 0.4% for the month and 5.4% for the year.

The lack of a pick-up in mortgage lending may provide further encouragement for the RBA to cut the cash rate on December 4.

CommSec says the weak lending figures add weight to a December rate cut.

"The Reserve Bank is likely to be disappointed by the latest round of data. There are not many reasons for encouragement and overall the data doesn’t highlight any significant shift in activity patterns across the economy," says Savanth Sebastian, economist at CommSec.

The central bank is likely to be more focussed on the global economy and the downside risks to global growth. At the Reserve Bank Board meeting next week, it is likely that the merits of another rate cut will be debated long and hard. We believe the Reserve Bank should be cutting rates by 25bps in a effort to spur activity and shore up domestic growth

Overall, Australian consumers and businesses continue to deleverage with total credit provided to the private sector by financial intermediaries rising by just 0.1% over October 2012, after rising by 0.3% September. Over the year to October, total credit rose by 3.8%.

Personal credit increased by 0.1% over October, after increasing by 0.3% to be down 0.7% for the year to October.

Business credit decreased by 0.3% over October, after increasing by 0.3% over September to be up 3.3% for the year to October.

Banks share of all lending stands at 92% with non-bank lenders accounting for 8% of loans advanced.