Lending Indicators methodology

For detailed definitions, please see Reporting Standard ARS 701.0 ABS/RBA Definitions.

Comprises finance where a business buys part (or all) of another business, in order to assume control of the firm.

Means any structural or non-structural change to existing residential property, non-residential buildings or non-building structures.

It includes:

• repairs and maintenance;
• structural and non-structural changes to dwellings (e.g. garages, carports, pergolas, re-roofing, re-cladding etc.);
• structural and non-structural changes to non-residential buildings (e.g. renovations and refits); and
• non-building work that improves the value of properties with attached dwellings or non-residential buildings (e.g. pools or landscaping).
   

It excludes:

• dwelling or non-residential building furnishings not attached to the property. These are included under the appropriate personal or business purpose sub-class;
• changes to dwellings that result in the creation of new dwelling (e.g. an attached granny-flat). These are included as construction; and
• conversions from non-residential buildings to dwellings (and vice versa). These are included as construction.
   

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

A borrower-accepted commitment exists for a loan or finance lease once an application has been approved, a loan/finance lease contract or letter of offer has been issued to the borrower, and the borrower has accepted the offer.

For bills, a borrower-accepted commitment occurs when the bill is accepted.

It includes: agreements to increase the credit limit of an existing loan contract (for example, as part of an internal refinance).

Means the creation of new dwellings, non-residential buildings or non-building structures.

For dwellings, it includes:

• construction of newly erected dwellings;
• changes to existing dwellings that result in the creation of a new dwelling (e.g. a granny-flat); and
• conversions from non-residential buildings to dwellings (e.g. a warehouse converted to apartments).
   

For non-residential building, it includes: conversions from dwellings to non-residential buildings.

A dwelling is a self-contained room or suite of rooms, including cooking and bathing facilities, intended for long-term residential use. A dwelling is private (not generally accessible by the public) and is contained within a building that is an immobile structure. A dwelling may comprise part of a building or the whole of a building.

An existing dwelling is one that has been previously occupied.

External refinance is a new loan obtained to replace an existing loan that was provided by a different lender.

For housing, it includes refinancing an existing loan for the same residential property.

Finance lease refers to the leasing or hiring of tangible assets under an agreement which transfers substantially all the risks and rewards incidental to the ownership of the asset. Title may or may not eventually be transferred.

First home buyers are borrowers entering the home ownership market for the first time, whether or not they are purchasing a dwelling for owner-occupation or investment purposes.

This includes all borrowers entering the home ownership market for the first time, regardless of whether or not they have received or are eligible for a first-home buyer grant.

If there is more than one party to the loan, a loan is classified as being to a first-home buyer if none of the borrowing parties to the commitment have previously owned a dwelling.

It excludes: internal refinance and external refinance of loans that were originally made to first-home buyers.

Fixed-term loans are loans extended for a fixed period, with a maturity date by which the loan must be repaid. Repayments over the fixed period reduce the loan balance and do not make further finance available.

It includes: redraw facilities attached to fixed-term loans.

It excludes: revolving credit facilities.

Internal refinance occurs where a new loan is obtained to replace an existing loan that was provided by the original lender and the credit limit has increased from that which was available prior to refinancing; or the credit limit on an existing loan by the lender is increased (e.g. a ‘top-up’). In both cases the funds must be used for substantially the same purpose class as the existing contract.

Investment loan is a loan to a household for the purpose of housing, where the funds are used for a residential property that is not owner-occupied.

Where the loan is for a residential property that is different to the residential property against which the loan is secured, this definition refers to the occupation status of the residential property for which the loan has been obtained (not the occupation status of the property used as security).

It includes: holiday/vacation homes and part-time residences that are not the borrower’s or borrowers’ principal place of residence.

A business is classified as large if it has turnover greater than or equal to $50 million.

Margin lending is the provision of secured loans to investors for the purpose of purchasing financial assets. The purchased assets are generally used as security for the margin loan. The financial assets purchased are usually equities or units in managed funds.

For the purposes of the EFS collection, margin lending facilities may be provided to households or private and public sector businesses.

It includes:

• fixed term loans; and
• revolving credit.
   

A business is classified as medium if the lender has a total exposure to the business that is greater than or equal to $1 million and the business has turnover of less than $50 million.

Refers to a dwelling that has not previously been occupied by a household.

It includes:

• off-the-plan purchases;
• dwellings resulting from the conversion of non-residential buildings to dwellings; and
• dwellings built by property developers speculatively for resale.
   

It excludes: existing dwellings that have been refurbished or renovated.

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

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 newly erected dwellings and not as loans for construction.

Refers to personal loans to purchase assets that are expected to maintain or increase in value other than housing. It excludes housing for the purposes of investment and margin loans.

Plant and equipment means any property, plant and equipment asset that is not property.

Such assets are typically vital to business operations but cannot be easily liquidated.

It includes:

• road vehicles;
• other transport vehicles and equipment;
• construction and earthmoving equipment;
• agriculture machinery; and
• electronic data processing and office equipment.
   

Business purpose means transactions by persons, legal entities or other organisations related to their activities in the production and sale of goods and services for profit. It also includes the transactions of non-profit institution such as community service organisations and transactions by private and public sector businesses.

Housing purpose means transactions by households related to the provision of residential property for use by the household sector. Housing includes transactions to finance or refinance the construction or purchase of newly erected dwellings or existing dwellings, alterations, additions and repairs or to purchase residential land. It includes finance to the household sector.

Personal purpose means transactions by persons within the household sector whose dealings with other sectors are for purposes other than business purposes or housing purposes.

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

Revolving credits are lending facilities that the borrower may repeatedly draw down in part or in full up to an authorised credit limit and repay, any credit drawn, in part or in full, on multiple occasions without the facility being cancelled. Repayments (other than of charges and interest) reduce the borrowings, thereby increasing the amount of unused credit available. It includes facilities with a fixed term that meet the above criteria.

It includes:

• arranged overdrafts. These are generally an agreed arrangement between a lender and a borrower to extend credit when the balance in an attached transaction account falls below zero;
• unarranged overdrafts. These refer to the situation when a transaction account holder withdraws an amount greater than the balance of the account leaving a negative balance. The lender usually charges an overdrawn account fee as well as interest on the negative balance, and usually requires the account holder to restore the account’s positive balance;
• secured and unsecured revolving credit facilities; and
• reverse mortgages.
   

It excludes:

• redraw facilities attached to fixed-term loans; and
• bill facilities.
   

Vehicles that are primarily used on the road, for example cars, trucks, motor vehicles and utes. It excludes attachments such as trailers, semi-trailers.

A business is classified as small if the lender has an exposure to the business that is less than $1 million and the business has turnover of less than $50 million.

Credit limit is the maximum amount of funds available to the borrower without additional authorisation or approval, including outstanding balances and other funds that can be drawn without additional approval by the lender in this amount.

A non-related party is not a related party, where a related party means a parent entity, controlled entity, joint venture entity and any other entity under the same parent entity.

Means finance for the purchase of goods that will then be on-sold.

Means a loan used to finance for everyday operations of the business, such as accounts payable and wages.

The Australian Bureau of Statistics (ABS) produces Lending Indicators with data sourced from the Australian Prudential Regulation Authority (APRA). The ABS does the final quality assurance and analysis of all data.

APRA is the independent statutory authority for the prudential regulation of the Australian financial services industry. The authority for APRA to collect data is granted under the Financial Sector (Collection of Data) Act 2001, which established APRA as the national statistical agency for the Australian financial sector. For more information about the roles and responsibilities of the organisation, see the APRA website.

For information on the institutional environment of the ABS, including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.

Lending Indicators presents monthly statistics on new commitments by significant Australian lenders for financing households and businesses. It includes:

• finance commitments for the construction, purchase, refinancing of, and alterations to owner occupied and investment dwellings;
• personal finance commitments;
• fixed finance commitments to businesses, and
• lease finance commitments to businesses.
   

Depending on the category of counterparty and loan purpose, these commitments may be classified by:

• state and territory;
• major banks, other Authorised Deposit-taking Institutions (ADIs) and non-ADIs;
• first home buyer (owner occupier and investor).
   

It is important to note the distinction between a financing commitment and actual financing activity. For example, housing finance commitments are not a direct measure of financing, sales or construction in the residential dwelling market. A commitment exists once the home loan application has been approved, and a loan contract or letter of offer has been issued to the borrower, and the borrower has accepted the offer. A commitment to lend will only happen after the property has been found and valued and mortgage insurance arranged (where relevant). The actual advancement of funds may not occur in the same month or necessarily at all.

Lending Indicators is released monthly, 28 working days after the end of the reference month.

The data published in lending indicators does not represent all new loan commitments in Australia. To reduce reporting burden on smaller lenders, the collection only aims to capture those lenders that contribute to 95% of total housing, personal and business credit outstanding as reported on the ABS/RBA Loans and Finance Leases Reporting standard (ARS 720.1).

Lending Indicators has no sampling error since it does not select providers to be in sample but tries to enumerate all providers in scope that meet the specified coverage. Lending Indicators also has low non-response rates. As with all surveys, Lending Indicators does have non-sampling error arising from inaccuracies in collection, recording and processing. Every effort is made to minimise non-sampling errors by the careful design of questionnaires, contact with providers and efficient data processing procedures.

Revisions to previously published statistics are included in the publication as they occur.

The Methodology page has more detail on scope and coverage.

The Economic and Financial Statistics (EFS) collection was implemented from July 2019 to improve the reliability and accuracy of the data collected. Where new concepts under the EFS collection were sufficiently similar to those previously published, the ABS has produced historic series back to July 2002 (i.e. a backcast series) to help with historical analysis and comparability of data. For more detail please see Information paper: Upcoming changes to Lending to Households and Businesses, Australia.

Prior to the commencement of the EFS collection the following changes to forms and reporting requirements:

2001-2003:

• APRA took responsibility for data collection from regulated entities on behalf of the ABS. A small number of unregulated entities continued to report direct to the ABS.
   

February 2019:

• Lending to Households and Businesses (reference period, December 2018) replaced two separate publications: Housing Finance and Lending Finance.
   

July 2019:

• The Economic and Financial Statistics (EFS) data collection reporting was implemented.
   

December 2019:

• Lending Indicators (reference period, October 2019) replaced Lending to Households and Businesses with reported data from EFS for the first time.
   

Occasionally a financial institution may change its institution type, for example, from a non-ADI to an ADI. The reclassification caused by such a change is reflected in the month it occurs, and earlier periods are not revised.

Statistics are generally provided in trend, seasonally adjusted and original terms. The trend series smooths out the volatility in the data including removing seasonal effects (such as the number of trading days and moving holidays), and is therefore considered the best indicator of underlying movements. The seasonally adjusted series removes the seasonal effects but does not smooth out the volatility in the data. The original series neither removes the seasonal effects nor smooths out the volatility in the data.

Both seasonal and trend estimates, by their nature, are subject to revisions over time. In most instances, the larger revisions will be to the previous month and the same month a year ago. For more information regarding seasonal adjustment and trend series, please see Time Series Analysis Frequently Asked Questions.

Definitions are listed in the Glossary.

Enquiries can be made through the ABS National Information and Referral Service on 1300 135 070 or by email to client.services@abs.gov.au. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.

Other data sources include the APRA Statistics website and the Reserve Bank of Australia's Bulletin. They include a large number of tables of financial statistics, mostly sourced from the ABS and APRA.