ABS data confirms COVID lending trends

by Madison Utley11 Jun 2020

ABS statistics published yesterday have given firmer shape to the trends established over the last few months, providing the figures around the significant drop in new lending and record refinancing activity.

In April, new lending dropped by 4.8% from the month before, with the total value down by $935.5m from March. 

The value of new loan commitments for owner occupier housing fell 5.0%, while the investor side was down 4.2%. 

While the value of loans to first home buyers in April fell by 1.9%, it was still 34.5% higher for the year.

“In relation to mortgages, today’s drop is likely to be the beginning of a long road ahead for the home lending market,” said Sally Tindall, RateCity.com.au research director.  

“In April alone, nearly one billion dollars of new lending was ripped out of the property market, as the country went into lockdown; the biggest monthly drop in new lending since October 2015 in dollar terms.”

However, the data also revealed that while new lending was sluggish, a record $7.9bn of owner occupier home loans were refinanced in April – up 50% in a year.

“Refinance activity has taken off during lockdown. We expect this to continue to gain pace with many homeowners looking to sure up their finances,” said Tindall.

While April was the month when the economic impact of COVID-19 was most acutely felt within Australia, other factors may have tempered the figures from the month.

“COVID-19 operational impacts experienced by some lending institutions resulted in a backlog of March housing loan applications being processed in April, which moderated the April fall in loan commitments,” explained ABS chief economics Bruce Hockman.

The value of new loan commitments for fixed term personal finance also fell sharply in April, down 24.8%.

“This was the largest fall in the history of the series, which started in July 2002, and was driven by a 37.8% fall in the value of loan commitments for road vehicles,” said Hockman.