5601.0 - Lending to households and businesses, Australia, May 2019 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 11/07/2019   
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GLOSSARY

Alterations and additions

Alterations and additions cover all structural and non-structural changes which are integral to the functional and structural design of a dwelling. Examples are garages, carports, pergolas, reroofing, recladding, etc. Alterations and additions do not include swimming pools, ongoing repairs, or maintenance and home improvements which do not involve building work.

Authorised deposit-taking institutions

Authorised deposit taking institutions (ADIs) refers to banks, building societies and credit unions. All other financial institutions in scope of Lending to households and businesses are non-ADIs.

Commitment

A finance commitment is a firm offer to provide finance which has been accepted by the borrower. A commitment exists once the loan application has been approved, and a loan contract or letter of offer has been issued to the borrower.

Construction of dwellings

Lending to households for construction of owner occupier dwellings represents commitments made to finance, by way of progress payments, the construction of dwellings.

Lending to businesses for construction of dwellings for rent or resale does not require the loan amount to be advanced by way of progress payments.

Debt consolidation

For personal finance, comprises a commitment whose principle purpose is to consolidate and pay out amounts owing by the borrower to third parties.

Dwelling

A dwelling is a place of residence which is contained in a building which is an immobile structure, private (i.e. not generally accessible to the public) and self-contained (i.e. includes bathing and cooking facilities).

Established dwelling

An established dwelling is one which has been completed for 12 months or more prior to the lodgement of a loan application, or a dwelling which has been previously occupied.

First home buyers

First home buyers are individuals purchasing a dwelling as an owner occupier for the first time.

First home buyers ratio

There are two first home buyers ratios published in Lending to households and businesses:

Owner occupier first home buyers, % of commitments to all owner occupier dwellings financed and refinanced = (the number of owner occupier first home buyers) (the total number of commitments to owner occupier dwellings financed including refinancing)

Owner occupier first home buyers, % of commitments to owner occupier dwellings financed excluding refinancing = (the number of owner occupier first home buyers) (the total number of commitments to owner occupier dwellings financed excluding refinancing)

The ratios are expressed as a percentage, and can be referred to as a proportion.

Finance lease

Refers to the leasing or hiring of tangible assets under an agreement, other than a hire purchase agreement, which substantially transfers from the lessor to the lessee all the risks and benefits incident to ownership of the asset without transferring the legal ownership.

Fixed loans

Generally involve:

  • a commitment for a fixed amount for a fixed period for a specific purpose
  • a schedule of repayments over a fixed period
  • repayments which reduce the liability of the borrower but do not act to make further finance available.

Fixed rate loan

Fixed rate loans have a set interest rate which cannot be varied, either upward or downward, for a specified period. Capped loans are not categorised as fixed rate loans because their interest rate can vary within period for which the cap applies.

Investment dwellings

Lending for investment dwellings relates to loan agreements entered into for the purpose of purchasing or constructing an investment dwelling (i.e. a dwelling for rental or resale purposes). Investment dwellings are dwellings that will be occupied by persons other than the owner(s).

Motor vehicles

Includes cars, station wagons, four-wheel drive, and forward control passenger vehicles with up to nine seats (including the driver).

Newly constructed dwellings

A new dwelling is one that has been completed within 12 months of the lodgement of a loan application, and the borrower will be the first occupant. This includes lending for off-the-plan purchases of dwellings.

Non-ADIs

Financial institutions that are not Authorised deposit-taking institutions (ADIs). Non-ADIs are money market corporations such as brokers, finance companies and securitisers.

Off-the-plan

Off-the-plan dwelling purchases typically require a deposit from the buyer before dwelling construction is completed and usually before construction has commenced. Buyers often obtain in-principal, pre-approval for a home loan for the completed dwelling. In practice, lenders usually value the nearly completed dwelling and make a lending decision based on consideration of circumstances prevailing at that time. The lending commitment associated with off-the-plan dwellings usually eventuates close to the dwelling’s completion which is usually many months after the deposit was paid.

Loans for off-the-plan purchases of dwellings should be categorised as loans for new dwellings and not as loans for construction. Some lenders routinely misclassify off-the-plan loans as loans for construction and so lending to households for construction of owner occupier dwellings is over-stated and lending to households for purchase of newly constructed dwellings is understated by an unknown amount.

Plant and equipment

Includes agricultural machinery and equipment, construction and earth moving equipment, electronic data processing equipment, manufacturing equipment, motor vehicles and office machines.

Purpose

Of the loan is that specified by the borrower. Where possible multiple purpose loans are split and each component is reported in the appropriate purpose category. Otherwise the whole loan is classified to the major purpose.

Real property

Comprises both residential and non-residential land, buildings and fixed structures.

Refinancing

For lending to households for the purchase of dwellings, for both owner occupation and investment, refinancing only refers to loans that are being refinanced to a new lender, and the security is unchanged (For example, refinancing existing home loans on the same residence). This does not include commitments to refinance existing loans, where there is no change in the property offered as security, and the institution offering the commitment is the original lender (For example refinancing from a variable rate loan to a fixed rate loan).

Revolving credit

Generally has the following characteristics:
  • a commitment for a credit or borrowing limit is given for a specific period after which the commitment is reviewed
  • the extent of the borrowing used at any time during the period may be for any amount up to the authorised limit
  • repayments (other than of charges and interest) made during the period reduce the extent of the borrowing used and thereby increase the amount of unused credit available up to the authorised limit. Examples include credit cards, lines of credit and approved overdrafts.

Secured credit limits

Includes overdrafts, lines of credit, credit cards, etc. backed by a mortgage or other assets owned by the borrower.

Secured housing finance

Comprises all secured commitments to households for the construction or purchase of dwellings for owner occupation, regardless of type of security.

Total credit limits at end of month

Comprises total approved credit limits available at the end of the reference month. In principle, this can be derived by adding new and increased lending commitments during the month less cancellations and reductions of credit limits during the month to the balance of credit limits at the end of the previous month. In practice, however, revisions and other adjustments (such as the transfer of an existing fixed credit facility) will mean that such a derivation is inexact.

Wholesale finance

Comprises finance for the purchase of goods by retailers and wholesalers.