Falling prices entice borrowers

According to one broker group the drop in dwelling value may be seeing more buyers

Falling prices entice borrowers


By Rebecca Pike

Recent data could suggest that cooling property prices are bolstering sales in Australia’s residential property market.

Property prices have fallen across Australia, particularly in the capital cities. According to Mortgage Choice this may be having an effect on the number of Australians applying for home loans.

While the latest Housing Finance Data from the Australian Bureau of Statistics (ABS) showed the number of home loans approved in May decreased by 0.7% in trend terms, in seasonally adjusted estimates they increased by 1.1%.

The data also showed that $31.9billion worth of dwelling commitments were made throughout May, an increase of 0.5% in seasonally adjusted terms from the month before.

CoreLogic data revealed that in May, Australian dwelling values posted their first annual decline since 2012.

Mortgage Choice CEO Susan Mitchell said, “It may be too soon to tell if APRA’s removal of the cap on investor loans is having any effect on the increase in demand for this type of home loan.

“In fact, national dwelling values slipped, led by a drop of 0.2% in Sydney and a 0.5% drop in Melbourne, which together have a significant effect on the national house market’s performance.

“This data is promising and suggests that housing affordability may be improving, enticing once cautious home buyers to enter the market, or property investors seeking a bargain.”

The latest Mortgage Choice national home loan approval data has also revealed borrower preference may be starting to shift.

An 11 month trend of variable rate preference could be coming to an end, with fixed rate home loans accounting for 18.67% of all loans written in June, up from 17.93% in May.

In the wider environment, a combination of factors, including an increase in wholesale funding costs, regulatory changes and tightening lending policies are having an effect on the overall cost of borrowing.

Mitchell added, “Cautious borrowers who recently entered the market may be aware that despite a stagnant cash rate, lenders are increasingly making small, out of cycle rate increases on home loan products.

“These factors are pushing some borrowers who are increasingly wary of the financial impact from future rate rises to seek certainty by fixing their home loans.

“In fact, our national home loan approval data shows that borrower demand for fixed rate home loans rose slightly in June.

“That being said, variable rate home loans continue to be the most popular type of home loan products across the nation.”



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