Home loan demand dives

by Miklos Bolza10 Nov 2017
Demand for home loans has slumped over the past month with both the number and value of housing finance commitments decreasing during that time.

These trends come from the latest housing finance figures released by the Australian Bureau of Statistics (ABS) yesterday (9 November) which show that 55,800 home loans were approved during the month of September in seasonal terms – down by 2.3% from the 57,100 approved the month before.

This drop was largely expected, said Mortgage Choice CEO John Flavell who noted that while there had been an initial spike in demand when interest rates first started to fall, this was projected to drop anyway.

“Given that rates have been so low for so long, it is only natural that we would eventually see a slight reduction in the level of home loan demand.”

The value of total dwelling commitments dropped by 3.6% from $32.5bn to $33.1bn in seasonally adjusted terms in September. Value of investment lending experienced the biggest fall, decreasing 6.2% while owner occupied mortgages fell 2.1% during this time.

With recent policy and pricing changes around the investment market, this downwards trend was not surprising, Flavell said.

Home loan demand was still quite high looking over the long-term, he added, saying that the market is far from collapsing.

“Quite the opposite. Over the last three months, more than 55,000 home loans were approved on a monthly basis. The last time home loan demand was this strong for this long was over a year ago.”

In trend terms, the proportion of first home buyers as part of total owner occupied housing commitments rose to 17.4% and is the highest it has been since November, noted president of the Real Estate Institute of Australia (REIA) Malcolm Dunning.

“It is pleasing to see the increased presence of first home buyers. The figures show that owner occupiers and first home buyers responding to more stable conditions and, in the case of first home buyers, state government incentives,” he said.

However, Tim Reardon, principal economist at the Housing Industry Association (HIA), warned that the drop in investment lending should be carefully monitored.

“This is a concern for the market as investors remain important to the ongoing supply of new homes in the market available for rent.”

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