Thursday, January 14, 2010

Remember bank loans?

They're back

Personal loans are making a comeback, but its the banks who are getting the cream.

The latest lending figures show fixed-term borrowing for purposes such as cars, boats and travel has jumped 38 per cent since its low point in November 2008 at the depth of the financial crisis.

All of the growth has been captured by the banks who boosted personal lending an extraordinary 57 per cent in the year to November at the expense of non-bank institutions whose lending dropped 13 per cent.

Lending to buy new cars jumped 8 per cent, lending to buy boats 19 per cent, and unsecured lending to buy blocks of land 50 per cent...

"The improvement in economic conditions and in particular the sustained improvement in consumer confidence is starting to resonate," said CommSec economist Savanth Sebastian. "Job security is giving consumers more confidence to go ahead with planned purchases of big ticket items like motor vehicles."

The figures show a move away from borrowing to buy used cars with the lending to buy second-hand cars and wagons down to its lowest point in the 22 years records have been kept.

Australians also seem to be shying away from credit cards with the 38 per cent growth in fixed loans far outstripping a 6 per cent growth in credit card and personal revolving credit limits.

Other figures released yesterday show our desire to buy mobile phones accelerating with December the second-biggest on record. The Australian Mobile Telecommunications Association said a near-record 9.1 million mobile phones were imported in 2009, more than any year other than 2007.

The 17 million mobile phones imported over the last two years amount to one for each Australian over the age of 15.

"The data on mobile phone sales is confirmation that consumer spending is recovering," said Mr Sebastian. "Aussie shoppers are still cautious, largely waiting for discounting to buy the goods they need, but that is to be expected given the shock of US financial crisis and expectations of further rate hikes."

The Bureau of Statistics lending figures show the trend in commercial lending continuing to deteriorate despite a 4 per cent jump in November. The trend is down 8 per cent over the year. Mortgages for housing fell 3 per cent in November and lending for renovations 2 per cent after mortgage rates began climbing in October.

The figures were published a day after ABS data showing a 6 per cent fall in in the number of home loans taken out in November.

Mr Sebastian said the locomotive of lending had switched from mortgages to personal loans.

"It is ironic that over the past year what supported lending finance was housing, which has now contracted largely due to the fact that we've had rate hikes and the expiry of the First Home Owners Boost," he said.

"The Boost brought forward purchases by six months or so and we're seeing the natural lull now."

The Reserve Bank bard will meet in three weeks to decide whether to increase rates again for what would be the forth consecutive meeting.

A further increase of 0.25 points would add another $47 per month to the cost of servicing a $300,000 mortgage on top of the $135 to $185 added since October.

Published in today's SMH and Age

Graphic: US Real Estate Outlook

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