New home lending surges to highest level since January 2018

New home lending surges to highest level since January 2018

New home lending made another surge in August, despite the fact Australia was staring down the barrel of a recession.

New data out today from the ABS shows $21.3 billion in new home loans were settled in August, up 19.3 per cent year-on-year and the highest monthly figure since January 2018.

Owner-occupiers led the way with the value of new loans increasing by 13.6 per cent from the previous month and 29.2 per cent year-on-year.

Value of new lending

  August amount Monthly change Year-on-year change
Owner occupiers $16.3 billion

13.6%

$1.95 billion

29.2%

$3.68 billion

Investors $5.0 billion

9.3%

$428 million

-4.6%

-$243 million

Total $21.3 billion

12.6%

$2.37 billion

19.3%

$3.44 billion

Source: ABS lending indicators August 2020, released 9 October 2020, seasonally adjusted data, excludes refinancing.

First home buyers – highest number of loans settled in more than a decade

A total of 12,302 owner occupier first home buyers settled loans in August, which is the highest monthly figure since October 2009.

New loans August number Monthly change Year-on-year change
Owner occupier 12,302

17.7%

37.3%

Source: ABS lending indicators August 2020, released 9 October 2020, seasonally adjusted data.

How home loan finance has changed since COVID

  • 203,780 new home loans were settled in the last 5 months (April to August)
  • 137,372 loans have been refinanced in the last 5 months (April to August)
  • The value of new home loans in August was 9.2% higher than in March before COVID hit.

RateCity.com.au research director Sally Tindall said the home lending market was proving to be more resistant to COVID than expected, with the value of new loans higher in August than March.

“The country-wide lockdown put the brakes on home sales in May, but since then, the market has rebounded defiantly,” she said.

“While this month’s data might be skewed by a backlog of home loans from the banks, over 200,000 new loans have settled since COVID hit – that’s a pretty decent number considering the turmoil we’ve been through.

“First home buyers in particular have stormed back on to the property scene, with the highest number of new loans settled in more than 10 years.

“That said, we expect the number of new home loans will fall next month as Victoria’s second lockdown flows through to the home lending market in Australia’s second largest state,” she said.

NEW OWNER-OCCUPIER LENDING – STATE BY STATE

State Value of new loans

August

Monthly % change Yearly % change
NSW $5.3 billion 7% 29%
VIC $4.7 billion 15% 24%
QLD $3.0 billion 14% 34%
SA $943 million 13% 27%
WA $1.4 billion 20% 34%
TAS $309.6 million 37% 39%
NT $76.8 million -2% 33%
ACT $443.7 million 27% 36%

Source: ABS lending indicators, seasonally adjusted data, excludes investors, excludes refinancing, value of new loans.

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Learn more about home loans

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

Who offers 40 year mortgages?

Home loans spanning 40 years are offered by select lenders, though the loan period is much longer than a standard 30-year home loan. You're more likely to find a maximum of 35 years, such as is the case with Teacher’s Mutual Bank

Currently, 40 year home loan lenders in Australia include AlphaBeta Money, BCU, G&C Mutual Bank, Pepper, and Sydney Mutual Bank.

Even though these lengthier loans 35 to 40 year loans do exist on the market, they are not overwhelmingly popular, as the extra interest you pay compared to a 30-year loan can be over $100,000 or more.

Are bad credit home loans dangerous?

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

How will Real Time Ratings help me find a new home loan?

The home loan market is complex. With almost 4,000 different loans on offer, it’s becoming increasingly difficult to work out which loans work for you.

That’s where Real Time RatingsTM can help. Our system automatically filters out loans that don’t fit your requirements and ranks the remaining loans based on your individual loan requirements and preferences.

Best of all, the ratings are calculated in real time so you know you’re getting the most current information.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

Can I change jobs while I am applying for a home loan?

Whether you’re a new borrower or you’re refinancing your home loan, many lenders require you to be in a permanent job with the same employer for at least 6 months before applying for a home loan. Different lenders have different requirements. 

If your work situation changes for any reason while you’re applying for a mortgage, this could reduce your chances of successfully completing the process. Contacting the lender as soon as you know your employment situation is changing may allow you to work something out. 

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

Do the big four banks have guarantor home loans?

Yes, ANZ, Commonwealth Bank, NAB and Westpac all offer guarantor home loans. These mortgages are also offered by many other banks, credit unions and building societies.

Do other comparison sites offer the same service?

Real Time RatingsTM is the only online system that ranks the home loan market based on your personal borrowing preferences. Until now, home loans have been rated based on outdated data. Our system is unique because it reacts to changes as soon as we update our database.

Does Australia have no cost refinancing?

No Cost Refinancing is an option available in the US where the lender or broker covers your switching costs, such as appraisal fees and settlement costs. Unfortunately, no cost refinancing isn’t available in Australia.

Can I get a home loan if I am on an employment contract?

Some lenders will allow you to apply for a mortgage if you are a contractor or freelancer. However, many lenders prefer you to be in a permanent, ongoing role, because a more stable income means you’re more likely to keep up with your repayments.

If you’re a contractor, freelancer, or are otherwise self-employed, it may still be possible to apply for a low-doc home loan, as these mortgages require less specific proof of income.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Is there a limit to how many times I can refinance?

There is no set limit to how many times you are allowed to refinance. Some surveyed RateCity users have refinanced up to three times.

However, if you refinance several times in short succession, it could affect your credit score. Lenders assess your credit score when you apply for new loans, so if you end up with bad credit, you may not be able to refinance if and when you really need to.

Before refinancing multiple times, consider getting a copy of your credit report and ensure your credit history is in good shape for future refinances.