Low rates, FOMO drive home lending to new high in December

The value of home loans settled in the month of December has hit another record high, thanks to record-low rates, generous government incentives and borrowers’ fear of missing out.

Data out today dovetails with CoreLogic’s national home value index, which hit a record high in January.

The latest ABS lending indicators released today, showed the total value of owner-occupier home loans settled in December was $19.94 billion – a record high – up 38.9 per cent, year-on-year, in seasonally-adjusted terms.

Overall, lending to households also hit a new record high of $26.01 billion, up 31.2 per cent year-on-year.

Value of new home loans approved in December

Source: ABS Lending Indicators Dec 2020, released 1 Feb 2021, excludes refinancing, seasonally adjusted data

First home buyers – number of new owner-occupier loans approved in December

Source: ABS Lending Indicators Dec 2020, released 1 Feb 2021, seasonally adjusted data

Construction loans – value of new owner-occupier loans approved in December

Source: ABS Lending Indicators Dec 2020, released 1 Feb 2021, seasonally adjusted data

Sally Tindall, research director at RateCity.com.au, said data from Core Logic and ABS out today showed both property prices and home lending had hit new record highs. 

“Record low rates are fuelling the boom in home lending, alongside targeted government incentives and a fear of missing out, particularly among first home buyers who are now watching property prices tick up,” she said.

“While first home buyers have continued their surge onto the property scene, investors are also starting to make a comeback, adding more competition in an already crowded market where in many locations, stock is in short supply. 

“NSW’s proposed changes to stamp duty, if implemented, will give local first home buyers another boost, as it allows potential buyers to redirect upfront stamp duty costs towards their deposit.

“While it’s great to see first home buyers finally getting a foot in the door, buyers should think long-term when deciding how much to borrow. 

“The issue facing us in 2021 clearly isn’t a slump in the market, but a spike, which has the potential to push people into borrowing more than they can afford, particularly if the government’s proposed changes to responsible lending go ahead.

“The government’s argument that we need to free up the flow of credit makes zero sense in the face of today’s figures. If anything, the regulators will be looking to put new restrictions on risky lending through caps on low deposit loans and loans with high debt-to-income ratios if the market continues to soar.

“It’s up to the parliament to knock the responsible lending changes on the head. The last thing we want is for people to be pushed into loans they can’t afford to repay in a heated property market,” she said.

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