Home loans rebound, largest monthly rise on record: ABS

Home loans rebound, largest monthly rise on record: ABS

The home loan market is showing signs of a recovery following the COVID-19 volatility with a surge in new commitments, figures from the nation’s statistical body reveals.

About $19 billion was spent on new home loan commitments in the month of July, the Australian Bureau of Statistics (ABS) revealed, a nearly 9 per cent increase that is the largest in the statistical body’s data series.

The surge in home loan commitments excluded people refinancing existing mortgages and was bolstered by the strong presentation of first home buyers.

The increase was off the back of easing COVID-19 restrictions, including open houses and auctions, Amanda Seneviratne said, head of finance and wealth at the ABS.

“July owner occupier home loan commitments rebounded with the largest month-on-month rise in the history of the series, as social distancing restrictions eased in most states and territories," she said.

“New loan commitments for owner occupier housing rose in all states and territories, except the Australian Capital Territory. 

“The largest increases were in New South Wales, Victoria and Queensland.”

The combined values of home loan applications in July of $18.92 billion still represented a drop prior to the COVID-19 pandemic. At the beginning of the year in January, for instance, home loan commitments were valued at $20.73 billion.

But the rebounding figure offered some insight into people’s appetite for buying a property following the easing of coronavirus restrictions.

Plenty of first home buyers

Most of the new loan commitments were made by people who wanted to live in them. 

Owner occupiers represented a rise of 10.7 per cent to $14.33 billion, while investor housing increased by 3.5 per cent to $4.58 billion, the ABS said.

First home buyers accounted for 32.5 per cent of all owner occupier commitments, a rise of 14.4 per cent.

The timing coincides with the first home loan deposit scheme’s release of 10,000 placements for the new financial year. However, it is unclear how this influenced the 11,018 commitments made by first home buyers in July.

The scheme allows people to buy their first property with a mortgage deposit as little as 5 per cent without needing them to save for lenders mortgage insurance. This is because the government guarantees the remaining deposit shortfall.

The first report assessing the scheme’s performance found it helped buyers enter the property market four years quicker on average.

Victoria’s second lockdown could affect the recovery

All states other than the ACT showed a rebound in home loan commitments, but the ABS anticipates Victoria’s will face complications as a result of its second lockdown.

“The value of new loan commitments for owner occupier housing in Victoria rose 8.9 per cent in July,” Ms Seneviratne said. 

“(This reflected) the period of eased COVID-19-related restrictions prior to restrictions tightening again from later in July."

Melbourne recently became the capital city with the highest proportion of property vacancies in Australia after dethroning Sydney, according to Domain Group, a confluence of stage four restrictions with a decrease in international students and visiting migrants.

The Reserve Bank estimates the second outbreak will lead to a fall in the state’s GDP growth of 2 per cent during the second quarter, impacting the national economic recovery. 

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about home loans

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

How personalised is my rating?

Real Time Ratings produces instant scores for loan products and updates them based what you tell us about what you’re looking for in a loan. In that sense, we believe the ratings are as close as you get to personalised; the more you tell us, the more we customise to ratings to your needs. Some borrowers value flexibility, while others want the lowest cost loan. Your preferences will be reflected in the rating. 

We also take a shorter term, more realistic view of how long borrowers hold onto their loan, which gives you a better idea about the true borrowing costs. We take your loan details and calculate how much each of the relevent loans would cost you on average each month over the next five years. We assess the overall flexibility of each loan and give you an easy indication of which ones are likely to adjust to your needs over time. 

How can I get a home loan with no deposit?

Following the Global Financial Crisis, no-deposit loans, as they once used to be known, have largely been removed from the market. Now, if you wish to enter the market with no deposit, you will require a property of your own to secure a loan against or the assistance of a guarantor.

How does a redraw facility work?

A redraw facility attached to your loan allows you to borrow back any additional repayments that you have already paid on your loan. This can be a beneficial feature because, by paying down the principal with additional repayments, you will be charged less interest. However you will still be able to access the extra money when needed.

What is a building in course of erection loan?

Also known as a construction home loan, a building in course of erection (BICOE) loan loan allows you to draw down funds as a building project advances in order to pay the builders. This option is available on selected variable rate loans.

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.

Mortgage Calculator, Loan Amount

How much you intend to borrow. 

Mortgage Calculator, Repayments

The money you pay back to your lender at regular intervals. 

Mortgage Calculator, Interest Rate

The percentage of the loan amount you will be charged by your lender to borrow. 

Mortgage Balance

The amount you currently owe your mortgage lender. If you are not sure, enter your best estimate.

Mortgage Calculator, Repayment Type

Will you pay off the amount you borrowed + interest or just the interest for a period?

Mortgage Calculator, Deposit

The proportion you have already saved to go towards your home. 

What is breach of contract?

A failure to follow all or part of a contract or breaking the conditions of a contract without any legal excuse. A breach of contract can be material, minor, actual or anticipatory, depending on the severity of the breaches and their material impact.

Mortgage Calculator, Repayment Frequency

How often you wish to pay back your lender.