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Feature Article - Housing Finance - Changes in Content and Concepts in this issue
2. Two new tables are included from this issue:
3. Unpublished tables released on the Ausstats electronic service have been renumbered. See page 4 for a list of these tables.
4. Consequent to the change in coverage, the main features and commentary have also changed, following a round of consultation with major data users.
5. This article provides and overview of the concepts and data sources underlying the statistics presented in these two additional tables included in this publication.
Commitments and Loans Outstandings
6. Tables 1-11 in this publication provides data on number, value and percentage change in loan commitments. A loan commitment is defined as a firm offer of housing finance which either has been, or is normally expected to be, accepted. Over time the balance of loan commitments in existence will change in accordance with the equation:
(1) commitments t = commitments t-1 + new commitments t - drawdowns t - cancellations t
where t refers to the current period, and t-1 is the previous period. Table 8 presents data relevant to this equation, and provides the value of commitments advanced for the purpose of owner occupied housing during the month as part of the measure of undrawn lending commitments at the end of a particular month. The value of commitments over time will be higher than commitments advanced, due to commitments cancelled by the lending institutions (generally after the commitment lapses). There will also be a lag between the time of commitment and when the actual cash flows are advanced to the borrower.
7. Table 12 presents loan outstandings for Housing. Loan outstandings refer to the value of outstanding housing loans to Australian households as at a particular point in time (for statistics in this publication this refers to the end of the reference month). A loan is a defined as an asset of a lending institution, which is not evidenced by the issuing of a security by the borrower. The outstanding balance for housing loans will change over time in accordance with the equation:
(2) outstandings t = outstandings t-1 + drawdowns t + interest accruals t - repayments t - revaluations t - net sales, etc t
where t refers to the current period, and t-1 is the previous period.
8. Drawdowns (advances of loan amounts over a time period) is the main component of additions to housing loan outstandings, and the only component which relates to housing finance commitments displayed in the other tables in this publication. For fixed term loans, this represents the gross increase in credit associated with the settlement of a finance commitment. For secured revolving credit home loans (commonly known as home equity loans), this relates to the gross increase in credit associated with drawdowns on the home equity product for the construction or purchase of dwellings.
9. Interest accruals increases the stock of housing loan outstandings. In these statistics interest accruals are included in loan outstandings when due for payment. Small and stable amounts of interest accrued but not due for payment are reported in sundry accounts receivable by lending institutions who find it difficult to allocate interest accruals not due to the relevant loan accounts. These statistics thus exclude such accruals. These practices are consistent with reporting instructions of APRA and data on housing loans published by RBA.
10. Principal and interest repayments is the main component that contributes to reductions in outstanding loan balances. Data on repayments are not available.
11. In principle, revaluations may arise from price changes (the market value of a fixed interest contract will increase if prevailing interest rates fall, for example). In practice these statistics do not take into account valuation changes through price effects.
12. Revaluations may also occur through loans written off either in their entirety or in part. The loans outstandings data for ADIs are net of specific provisions for bad and doubtful debts, but gross of general provisions for bad and doubtful debts. This treatment is consistent with the statistics on housing loan outstandings published in the RBA Bulletin tables, and in particular consistent with the treatment of loan outstandings contributing to the Housing Credit aggregate in the Bulletin tables. Specific provisions refer to provisions raised against specific impaired assets based on arrears data. General provisions are provisions raised portfolios of loans, and are not assigned against specific loans within the lender's portfolio, and are considered as contingent. The loans outstanding after assessing specific provisions for impairment is a measure of the 'fair value' of the loan portfolio of lending institutions, since it is based on the value of the
expected future recoverable amount.
13. For housing loan balances of securitisation vehicles, no adjustment is made for specific provisions. Securitisation vehicles are special purpose vehicles (generally trusts) that issue mortgage backed securities, which are debt securities secured by specific pools of mortgages and repaid from the cash flows (principal and interest payments) of the specific mortgage pool. The mortgages held by securitisation vehicles are generally covered for impairments by mortgage insurance or hedging products, so as to ensure the high rating of the issued security. As such, specific provisions relating to these mortgages
tend to be zero or insignificant in value.
14. Housing loans sold, for example to a securitisation vehicle, during a particular period and removed from the balance sheet of the loan originator will result in a transfer of assets from the loan originator to purchaser. Other components may also contribute to a movement in the outstanding loan balance, such as fees associated with the loan that are not paid by the borrower and which are instead added to the loan balance during the current period. Data for sales of loans and capitalisation of fees are not available.
15. The purpose definitions for loan outstandings are similar to the instructions provided by lending institutions for the definition of housing finance for owner
occupation for reporting of commitments, except that the definition for housing loan outstandings excludes alterations and/or additions to dwellings. Housing loans outstanding for the purpose of owner-occupied housing consists of the value of secured and unsecured housing loans made to Australian households for the construction or purchase of dwellings for owner occupation. For revolving credit loans, this includes housing loans approved for a purpose of predominantly owner occupied housing.
16. Housing loans outstanding for the purpose of investment housing loans consist of the value of secured and unsecured housing loans made to Australian households for the construction or purchase of dwellings for non-owner occupation. This includes revolving credit facilities originally approved for a purpose of predominantly non-owner occupied housing. It should be noted, though, that investment housing commitments included in Table 11 of this publication do not include loan commitments issued with revolving credit facilities as the data are unavailable.
Data Sources for Loan Commitments and Outstandings
17. Loan outstandings to households for the purpose of housing are available from March 2002 in this publication. Housing loan outstandings presented in Table 12 are classified to the following lender types: Banks; Permanent building societies; Credit unions/co-operative credit societies; Securitisation vehicles; and Other lenders n.e.c..The first three of these types are components of the grouping Authorised Deposit-taking Institutions (ADIs). Loan outstanding for the ADI lender types are published monthly, and are classified by purpose (owner-occupied housing or investment housing). Building societies and credit co-operatives became authorised deposit-taking institutions (ADIs) under the Banking Act 1959 on 1 July 1999 when APRA took over the responsibility for their prudential regulation. APRA have undertaken responsibility for the supervision and regulation of banks from 1 July 1998.
18. For banks, credit co-operatives, building societies and corporations registered under the Financial Sector (Collection of Data) Act 2001 (known as Registered Financial Corporations (RFCs)), the statistics in this publication are currently derived from returns submitted to the Australian Prudential Regulation Authority (APRA). The Financial Sector (Collection of Data) Act 2001 facilitates the collection of statistical data from the financial sector, with APRA established as the central point for collection of both prudential and statistical data. In October 2001, APRA implemented new reporting forms for building societies and credit co-operatives. New reporting forms were implemented for banks in March 2002, and for RFCs in March 2003. APRA commenced collecting loan commitments data from banks, credit co-operatives, building societies in July 2002 and
from RFCs in March 2003.
19. Housing finance commitments for owner-occupied housing from banks, building societies and credit co-operatives are derived from form ARF 392.0 Housing Finance collected by APRA. Housing finance commitments for investor housing from these lenders are sourced from the ARF 394.0 Personal Finance. Housing finance commitments for RFCs are collected on the RRF 392.0 Housing Finance and RRF 394.0 Personal Finance for owner occupied housing and investor housing respectively.
20. Statistics on loan outstandings in Table 12 are sourced from banks on form ARF 320.0 Statement of Financial Position (Domestic Books), with lending by building societies and credit co-operatives derived from form ARF 323.0: Statement of Financial Position (Licensed ADI). While building societies and credit co-operatives with total assets greater than or equal to $50 million are required to report this APRA return on a monthly basis, those institutions with total assets less than this threshold are only required to submit this return on a quarterly basis. An undercoverage adjustment is made in deriving Table 12 in the intervening two months between each quarter ending month to derive estimates for the complete population on a monthly basis.
21. The quarterly data are used to adjust the particular monthly observation using the following formula:
AM t = ((Q t + Q t-1)/(QM t + QM t-1)) * M t
AM t = Adjusted monthly observation at month t
Q t = Quarterly observation at quarter t
QM t = Monthly observation at quarter t
M t = Monthly observation at time t
For the latest two monthly observations, the growth rate of the monthly series is applied to the quarterly observation at time t-1 using this formula:
AM t = (M t / M t-1) * Q t-1
22. Excel version of the forms and instructions for ADIs are available on the APRA website at
<http://www.apra.gov.au/Statistics/Revised-Authorised-Deposit-taking-Institution-ADI-reporting-requirements.cfm>. For RFCs, these are available at:
23. All other institutions, including securitisation vehicles, are collected directly by the ABS. Data on loan outstandings to households for housing purposes for these lender types are only available on a quarterly basis. The data for securitisation vehicles is sourced from the ABS Survey of Financial Information. The data for Other lenders nec. is compiled from a range of other data sources collected by the ABS.
Users may also be interested in the following ABS publications:
Assets and Liabilities of Australian Securitisers (cat. no. 5232.0.40.001) - issued quarterly;
Australian National Accounts: Financial Accounts (cat. no. 5232.0) - issued quarterly;
Buildings Approvals, Australia (cat. no. 8731.0);
Building Activity, Australia: Dwelling Unit Commencement, Preliminary (cat. no. 8750.0)
25. Quarterly data prior to the March 2002 for housing loan outstandings by type of lending institution is available as a priced special data report related to the Australian National Accounts: Financial Accounts (cat. no. 5232.0). Inquiries regarding this special data report should be made to the contact on the front cover of this publication.
26. In addition, the Reserve Bank of Australia produces the monthly Reserve Bank of Australia Bulletin as well as data on its web site. Bulletin tables D1 & D2 contain statistics on lending and credit aggregates (including the housing credit aggregate), which contain lending and credit to the private non-financial sector. Note though that the credit aggregates only includes lending provided by the following types of financial intermediaries: banks, credit co-operatives, building societies, RFCs and the RBA. Table D5 Bank Lending by Sector contains statistics on lending to persons for the purpose of housing, also classified by owner-occupiers and investors with statistics available from January 1990.
27. Residential lending by building societies and credit co-operatives is also published in Bulletin tables B7 and B8. These statistics are also sourced from APRA collected data, although this will differ to statistics in Table 12 of this publication since the Bulletin tables only include data for building societies and credit co-operatives with total assets greater than or equal to $50 million. Bulletin table B.16 Securitisation Vehicles contains outstandings information for mortgage held, which includes both residential and non-residential mortgages.
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