New home loan commitments climb to record high

by Mark Rosanes18 Jan 2021

The value of new home loan commitments has increased for the sixth straight month, hitting another record-high $24bn in November – a 5.6% jump from the month prior and a 23.7% rise year-on-year – according to seasonally adjusted figures from the Australian Bureau of Statistics (ABS).

The rise was mostly driven by commitments for existing dwellings – climbing 5.9% from the previous month – and owner occupier construction lending, which reached $3.01bn, posting a 5.6% increase in November and a remarkable 94.4% ascent from the same period in 2019.

Amanda Seneviratne, head of finance and wealth at ABS, said the value of construction loan commitments rose 75% since the government implemented the HomeBuilder scheme in July.

“Other federal and state government incentives and ongoing low interest rates also contributed to the continuing growth in new housing loan commitments,” she said.

Owner occupier first home buyer loan commitments accounted for more than a third, or 35.1%, of the overall owner occupier commitments, climbing 3.1% the month prior and 42.5% from the start of the year.

According to ABS, this is the highest that the numbers have reached since October 2009 when first home buyer incentives were tripled in response to the global financial crisis.

Steve Mickenbecker, financial services group executive at Canstar, said the rise in November loan commitments marked a strong finish to the spring selling season.

“November’s increase in home lending marks six months of momentum and with housing prices holding up much better than was expected at the start of the run, it’s looking like an irresistible force,” he said.

“First home buyers are flooding into the market, responding to federal and state incentives and low interest rates. With the property price buoyancy we have seen in some state capitals, fear of missing out will be playing on minds and driving people into action.”

However, despite a strong performance from the housing market, Mickenbecker warned that challenges remain on the horizon.

“While showing more promise this month, investment lending is still flat and it’s looking like investors are after better news on vacancies before they plunge back in,” he said.

“Refinancing to a new lender has dropped for the second consecutive month in spite of tumbling interest rates, suggesting that the big banks might have stemmed the flow with their low fixed rate deals.”

ABS figures showed that the value of external refinancing dropped 15.9% from the month prior, with mortgage holders refinancing $10.16bn worth of home and investment loans.