One of the curious features of the housing finance market over the past year is that there has been strong growth in new housing finance commitments but this has not shown up in total housing finance data, which is growing at a much slower rate.The number of new owner-occupier home loans in July was 15.9 per cent higher than the number in July last year, according to the Australian Bureau of Statistics. However, total owner-occupier loans were up only 4.1 per cent over the same period.An article in the latest Reserve Bank Bulletin, published yesterday, takes a look at this issue.According to the article, Partial Mortgage Prepayments and Housing Credit Growth, during the most recent monetary policy easing phase, the value of housing loan approvals as a share of outstanding housing credit rose. Yet the pick-up in housing credit growth has been modest by comparison.The article said: "One of the possible factors contributing to this divergence is an increase in the rate at which households are repaying their mortgages."The RBA estimated that the mortgage pre-payment rate, based on data provided by banks to the Australian Prudential Regulation Authority, increased by 90 basis points between September 2011 and June this year.Individual banks have reported their pre-payment levels. In the case of Commonwealth Bank, the country's biggest home lender, 80 per cent of the bank's 1.8 million Australian home loan borrowers are paying more than the required minimum monthly mortgage repayment.The RBA used a simulation to assess the likely impact of increased pre-payments on housing credit growth. The simulation results suggested that in the year following a 100 basis point reduction in lending rates, pre-payments would reduce growth in variable rate housing credit by one percentage point. Factoring in fixed-rate and interest-only loans, which are less susceptible to pre-payment, the reduction would be between 50 and 70 basis points.Using a second simulation, the RBA estimated that the 165 basis point reduction in the average variable rate between October 2011 and June 2013 would result in about a one percentage point reduction in housing credit growth over the period.The article said: "If there are no further changes to lending rates, the peak effect on year-end housing credit growth of around one percentage point will be likely to occur in mid-2014."When there is a low flow of new loans into the credit pool, as there has been in recent years, the impact of pre-payments remains relatively high."In an environment where lending rates are falling, higher pre-payments on mortgages reduce the rate of housing credit growth below what it otherwise would be."