Home loan demand on the rebound

The latest figures from the ABS show owner-occupied lending on the rise while investor lending tracks downwards

Home loan demand on the rebound



Demand for home loans has bounced back in the month of May, according to the latest figures from the Australian Bureau of Statistics (ABS).

National housing finance data released yesterday (11 July) found that 54,061 loans were approved in May, up 1% from the previous month.

“This bounce back in home loan demand is a positive sign for the property market and the broader economy,” Mortgage Choice chief executive officer John Flavell said. “That said, this bounce back in home loan demand is hardly surprising. The fact is the property market remains relatively buoyant, with historically low interest rates keeping the cost of borrowing low and heat in the market.”

The value of all dwelling commitments rose by 1.3% to just over $33bn during the month of May. This included a 2.9% increase in the value of home loan approvals for owner-occupied housing and a 1.4% decrease for the value of investment loans.

“Of course, I am not at all surprised by this. Over the past few months, Australia’s banks have been significantly tweaking their policy and pricing in relation to investment lending,” Flavell said. “In particular, we have seen some significant changes in the area of interest-only loans. Some lenders have raised their pricing, while others have adjusted their policy.”

This has seen some property investors postpone their plans for purchasing a home until a later date, he said.

Tim Reardon, principal economist at the Housing Industry Association (HIA), said that investment lending had decreased for the second month in a row – an issue to continue monitoring, he added.

“This could be as a result of the APRA restrictions that were announced at the end of March impacting on the confidence of investors,” he said. “This could also be due to the expectation that home price growth is likely to slow further.”

Reardon also highlighted the influx of first home buyers into the housing market in May.

“We have seen significant growth in lending to first home buyers in many parts of the country during the month which has coincided with an increase in lending for new homes. This is likely to be due to the ongoing uptake of apartments that have come onto the market this year.”

The amount that first home buyers were borrowing has remained relatively flat over time, he added.

Reardon also pointed to growth to new home buyers more broadly, especially along the east coast. With a 28% increase in lending in Queensland, the state had the strongest result for the month.

Looking ahead, Flavell predicted that home loan demand would remain relatively strong especially in the owner-occupied space.

“Interest rates are still low and will remain so for some time to come. In addition, some of the states have introduced new first home buyer incentives, which should also help to keep some heat in the market,” he said. “That said, the Australian property market is very complex at the moment. So, anyone thinking of buying or refinancing should speak to their mortgage broker to ensure they find the right product for their needs.”

Related stories:

Housing approvals fall for third month running

Census shows decline in mortgage repayments

Loan commitments at 23-month low

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