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Home lending bounces back in the lead up to spring

Home lending bounces back in the lead up to spring

New ABS data out today shows home lending is back with a bang, posting a 5.1 per cent jump month-on-month in new home loans settled in July.

Owner-occupiers saw the biggest growth, increasing 5.3 per cent in value in July compared with June figures, in seasonally-adjusted terms, excluding refinancing.

Investors have continued their come-back into the housing market, with the value of investor loans increasing 4.7 per cent, under the same terms.

First home buyers have continued their slow but steady return to the market, increasing their share of new owner-occupier lending to 29.4 per cent in July, up from 29.3 per cent in June – the highest proportion since January 2012.

Meanwhile, fixed loans continue to fall out of favour with borrowers. The proportion of owner-occupiers fixing fell to 10.4 per cent, which is the lowest level since October 2015.

Housing finance

Value of new loans

% change from previous month

% change year on year

Owner occupiers

5.3%

-8.3%

Investors

4.7%

-20.4%

All loans

5.1%

-11.8%

Notes: Seasonally adjusted figures. Figures exclude refinancing.

Note that in original terms, overall lending jumped 14.7% in July, with owner-occupier lending up 16.7% and investor lending up 9.4% month-on-month.

Source: ABS lending to households and businesses statistics for July 2019, released 9 September 2019.

RateCity.com.au research director, Sally Tindall, said the stars are starting to align for borrowers in the lead up to the spring property season, despite the gloomy economic outlook.

“Borrowers are feeling buoyed by a combination of plummeting interest rates, tax cuts, more relaxed serviceability measures and clarity around negative gearing,” she said.

“Interestingly, this is the first month that factors in APRA’s axing of its 7 per cent serviceability floor. It’s likely that part of the bounce can be attributed to this, and we expect it to continue to have a positive effect on the market.

Home loan share

Share of loans July 2019

Share of loans
June 2019

First home buyer share

29.4%

29.3%

Fixed loan share

10.4%

14.1%

Unknown

Notes: Based on the share of new owner occupier loans. 
First home buyer share excludes refinancers. Fixed loan share includes refinancers.

“However, Australians are still on the sidelines when it comes to fixing, despite banks’ best efforts to attract new fixed borrowers onto their books”, she said.

“It’s not surprising that a lot of Australians are now opting not to fix their home loan rate in this climate when the RBA has made it clear there could be one, if not two more rate cuts to come.

“There are now dozens of lenders offering fixed rates below 3 per cent and as low as 2.74 per cent, for owner occupiers paying principal and interest, especially if they have a decent amount of equity in their home.”

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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